Longest Bear Market in Crypto History?

In just 30 days, cryptocurrencies will have entered their longest bear market in history, according to Ran NeuNer, host of CNBC’s Cryptotrader show. The frenzied selloff since early 2018 has delivered a beat down to retail traders, hedge funds and long-term crypto holders. However, for one small corner of the market, business is thriving.

Bear Market Drags On

As of Thursday, the cryptocurrency bear market of 2018-19 has reached 391 days. By this time next month, the bear market would have stretched beyond the 420 days seen in 2014-15. Officially, it will be the longest bear market in crypto’s short history. (To refresh your memory, a bear market is defined as a drop of 20% or more from a recent high).

Of course, frantic selloffs are nothing new for cryptocurrencies. Since 2011, bitcoin has experienced at least five epic meltdowns, with losses ranging from 37% to 84%. Each time, the market has come back stronger than ever, culminating in the 2017 bull run that drove bitcoin toward $20,000.

At the height of the bull market in early 2018, cryptocurrencies were valued at a whopping $840 billion. Less than 12 months later, the market bottomed at just over $100 billion. The bearish trend is expected to resume until at least mid-2019, according to a combination of technical analysis, market sentiment and history of monthly momentum. There are, of course, other reasons to expect the bears to maintain control. These include regulatory uncertainty, hesitation on the part of institutional investors to participate and the fallout from the long-winded ICO boom.

Read why 2019 is bitcoin’s year of accumulation.

Interestingly enough, bitcoin has managed to set higher lows in six of the last seven years. In other words, bitcoin’s price bottom is incrementally higher almost every year stretching back to 2012.

Creditors Capitalize

As the bear market stretches on, crypto traders and startups are turning to creditors to fund their shortfall. As Bloomberg recently reported, crypto creditors are finding strong demand from traders who don’t want to sell their coins at depressed prices as well as from big investors looking to short virtual currencies.

Much like hedge funds, most crypto lenders began their operations in 2017 during the market boom. Hedge funds have struggled since the market downturn took effect while lenders have seen their business thrive.

As Olga Kharif notes, the crypto bust is putting lenders on both sides of the equation: “Helping believers pay their bills while awaiting a rebound, and also enabling bets by people who think the drop has further to go.”

As crypto ventures continue cutting staff, companies like BlockFi have grown their revenues and customers tenfold in just six months. Aave, which owns ETHLend, recently opened an office in London and will soon expand in the United States. A company by the name of Salt Lending already employs 80 people. (Keep your eye on Salt, as the U.S. Securities and Exchange Commission (SEC) is probing the company’s initial coin offering.)

The Future

Predicting crypto bottom is notoriously difficult, and many analysts have been burned trying to come up with logical answers to a market that is still in its infancy. In the next 12 months, the evolution of the crypto industry will be dictated by several factors, including the SEC’s regulatory oversight of the market, its ruling on a hotly debated bitcoin ETF and appetite for physical bitcoin futures among institutional investors.

Related: As Race for Bitcoin ETF Heats Up, SEC Identifies Cryptocurrency as a Top Priority in 2019

The ICO model that dominated 2017-18 is also undergoing a massive shift toward security tokenization and even initial exchange offerings. While it’s still too early to gauge the impact of these new funding models, it’s clear that the ICO market is on its last leg. Case in point: token projects raised $1.5 billion in January 2018. By December, that figure had fallen to just $59 million.

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 Hacked.com and Contributor to CCN.com, 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