Bitcoin Bear Market Will Likely Continue Due to Low Transaction Volume, Analyst Argues

Omar Faridi
  • Market analyst Willy Woo predicts bearish crypto market trend to continue.
  • On-chain transaction volume is not enough to start a bull run, based on Woo's NVT ratio.

Bitcoin’s (BTC) price has dropped by over 80% last year, and the value of other major cryptocurrencies has declined by as much as 99% (in some cases). According to some analysts, the digital asset market could now be ripe for a bullish run.

Willy Woo, a prominent researcher and cryptoasset analyst, recently noted via Twitter that on-chain digital currency transaction volumes were too low for prices to recover anytime soon. Woo, who accurately predicted in late May 2018 that bitcoin's price would drop below $6,000 before showing any signs of recovery, has now argued that high levels of volatility in recent weeks could have led to the surge in on-chain volume of cryptocurrencies.

Drop From $6K To $3K Not A Sign Of Accumulation

Assessing market conditions via a tweet, Woo wrote that the "initial volume spike false signalled a faster detox and an earlier end to the bear market." In rality, he added, it was a side effect of volatility, and the "move from $6k to $3k created immense trade volume, but it was in no way a signal that accumulation volume had begun."

Woo also observed:

Going on to explain price movements in the cryptocurrency market, Woo mentioned that the Network Value to Transactions (NVT) ratio (a metric he developed) was currently on the higher side. This, according to the Exodus wallet advisor, means the value of on-chain transactions is considerably lower than the valuation of the network.

Bear Market Could Last Until Second Half Of 2019

The NVT ratio is used to estimate the intrinsic value of cryptoassets, which helps investors determine when the price of bitcoin and other digital currencies is too low or too high. Commenting on how the effects of the recent spike in volume caused by high levels of volatility has now subsided, Woo noted: 

That volume has since subsided. Leaving the NVT chart on the high side of its oscillation around the main move downwards. The key thing here, in my interpretation, is it's on the high side of its band, so I think an up move is limited, bears will win the longer term trade.

In November 2018, Woo also predicted that a bearish trend in the crypto market would continue, arguing that downward pressure on bitcoin could last until the second half of this year. He referenced data from NVTS, which he observed had dropped below its support levels. Last year, Woo had said BTC's price would likely not be able to break past its 200-day Moving Average (MA).

He predicted (in November 2018):

If price (in the short term) bounces upwards here, which is certainly possible, I think the 200 day moving average is the upper band of the move. This is ~$7k right now. Remember if the price goes above the 200 DMA, in the history of BTCUSD’s 8-year trade history, it’s been a reliable indicator of a bear to bull transitions. It’s too early to transition out of the bear.

Bitcoin is trading at $3,859. according to CryptoCompare data, after recording an intraday high of around $3,972. The cryptocurrency market capitalization stands at just above $130 billion at press time.

IBM’s VP of Blockchain and Crypto on World Wire, XLM, Ripple, XRP, and BTC Price

On Wednesday (February 20th), during an interview with Australia's largest comparison site Finder.com.au, Jesse Lund, IBM's Vice President of Blockchain and Digital Currencies, talked about his company's cross-border payments solution "IBM Blockchain World Wire"(which runs on the Stellar network), how this product differs from what Ripple is doing with xRapid, and gave his medium term (end of 2019) and long term (some day) price predictions for Bitcoin (BTC).

In this article, we focus on some of Lund's most interesting comments made during this interview.

IBM Blockchain World Wire

"The architecture of World Wire is really a cross-border payment network, the magic of which is the ability to send a payment message instruction saying 'Hey, I'm sending you something; get ready!' and on the other end, the receiver is making sure that who you are sending it yo is not some nefarious actor or bad actor, but once that happens, and that happens really fast, then we send the value along, and that transfer of value is made possible by an ecosystem of digital settlement instruments, of which [Stellar] lumens is one."

"IBM's long game in this is to be the network operator... So, the subscribers, the customers, if you will, of World Wire are market makers who really provide the pay in, pay out locations, and they themselves have corporate clients and probably retail clients. So, we're really providing a kind of conduit through which money can flow in real-time." 

IBM Blockchain World Wire vs. Ripple's xRapid

"Credit Ripple for the vision of using a digital asset in order to enact immediate settlement with finality. I think their implementation followed one path. Our implementation is a little bit different. We are not the issuer of an asset. In fact, what we believe is that there should be an ecosystem of a variety of digital assets that provide the settlement instruments that enable these cross-border payments. The participants on the network should be able to choose and negotiate their choices in real-time and the pricing might be different depending on the settlement instrument you use. So, I think with Ripple, they're looking at XRP as the primary digital asset for settlement, and for us, it could be lumens, it could be Ripple, it could be XRP even, it could be Bitcoin, but it would also probably include other instruments like stablecoins and even eventually, hopefully soon, central bank issued digital currencies."

Bitcoin (BTC) Price Prediction

"[Bitcoin's price at the end of 2019] ... I think it's going be higher [than today], I'll go with $5,000, but let me just say this. I've got a long term outlook... I see Bitcoin at a million dollars some day. And I like that number because if Bitcoin is at a million dollars, then satoshi is on value parity with the U.S. penny, right? And that means there's $23 trillion of liquidity in this network. Think about $23 trillion in liquidity and how that changes things like corporate payments, large payments, and what that does to the financial services landscape."

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