Crypto Markets Search for Catalysts as Bitcoin Lightning Network Sees a Surge in Capacity

Crypto markets followed in bitcoin’s lead on Wednesday, establishing a more predictable trading range following a week of volatile moves. The search for direction suggests two possible outcomes: the market is basing for a potential move higher or is falling back into the hands of the bears.

Market Update

The cryptocurrency market is presently valued at $127.4 billion, having declined $20 billion from the most recent peak. Trading volumes subsequently dropped to $17.6 billion. No major gains or losses were reported among the biggest coins, though bitcoin cash rebounded following sharp losses at the beginning of the week.

Cryptoassets added a whopping $46 billion in less than two weeks, led by a sudden reversal for bitcoin, which crossed the $4,300 mark on Monday. So-called ‘digital gold‘ reached its highest level of the month, which helped propel other cryptocurrencies higher.

However, not everyone is convinced that the market has made a permanent turn. Morgan Creek Digital Assets founder Anthony Pompliano recently told CNBC that bitcoin will probably fall below $3,000 in the short term. This contrasts with the view presented by Ethereum co-founder Joseph Lubin, who recently proclaimed that ‘crypto bottom 2018’ had been reached.

Price action over the past two months has been overly technical in nature, and this is also true of the most recent rally. It remains to be seen whether the continued meltdown in stocks could propel bitcoin higher or whether the decline in tech shares will have a psychological influence over existing holders. The latter was put forward as a hypothesis by CNBC during the interview with Pompliano (namely, the possible correlation between FAANG stocks and bitcoin).

Bitcoin Lightning Network

Lightning Network, the highly-touted bitcoin scaling solution, has witnessed a sharp rise in capacity, raising optimism that the blockchain will one day facilitate large-scale transactions.

According to 1ML, the Lightning Network’s capacity has risen by 13% to 510.65 BTC. That’s equivalent to $1.9 million at current prices. The number of active channels has surged more than 23% to 15,876. Active nodes also increased 14.2% to 4,803.

The Lightning Network has made notable progress in recent months, having added nearly 6,000 channels since July. Over that period, the network’s capacity has increased over 400%.

Read more: Lightning Network Reaches 10,000 Channels And Total Capacity Of 100 Bitcoins.

Efforts to boost bitcoin’s transaction speed and lower the cost of payments are at the center of the Lightning Network. The second-layer scaling solution is based on the idea of creating smaller bidirectional payment channels that operate as a ‘running’ tab between two accounts. It is said that the trade-off for increased speed is a slight loss of security given that transactions are not carried out on the blockchain directly.

Scalability is a core debate within the blockchain community. Increased adoption of Lightning Network is a promising sign that bitcoin payments can one day become more mainstream. Real-time statistics on Lightning Network adoption can be found here.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi