We're Officially in the Longest Bitcoin Bear Market in History, 411 Days & Counting

  • Bitcoin (BTC) price has recorded downward movements since the past 411 days,
  • This is a new record, and crypto firms continue to either shut down or announce budget cuts and layoffs.

We are now officially in the longest cryptocurrency bear market ever seen. After hitting an all-time high near $20,000 in mid-December 2017, The the value of bitcoin (BTC), the flagship cryptocurrency, has been dropping throughout 411 days and counting. The cryptocurrency ecosystem has so far lost about $700 billion from its peak.

This, as in January 2018, the market cap of all cryptocurrencies surpassed the $815 billion mark, and currently the value of all cryptocurrencies combined stands slightly below the $115 billion mark.

Notably, this is the sharpest and longest depreciation bitcoin has endured throughout its 10-year history. The previous record for downward bitcoin price movement was between late November 2013 and mid-January 2015 - when BTC’s value declined from about $1,100 to only $200 after the largest crypto exchange at the time, Mt Gox, went down.

"Really Struggling" To Acquire Capital

Due primarily to the prolonged cryptocurrency bear market, there have been many cases where blockchain startups had to scale back their operations. In August 2018, Meltem Demirors, the chief strategy officer at CoinShares, a crypto treasury management firm, said during a CNBC interview that the crypto industry was “really struggling” to acquire capital.

Indeed, a large number of crypto-related service providers have revealed that they’ve had to lay off staff members and make other budget cuts due to lack of funding. Canada-based cryptocurrency exchange Coinsquare recently announced that it had laid off 27% (40) of its employees.

Making "Some Tough Choices"

Local news outlet BetaKit reported that Robert Mueller, the chief operating officer at Coinsquare, and Ken Tsang, the chief financial officer, were both laid off. Commenting on CoinSquare’s decision to reduce the size of its workforce, Martin Hauck, the exchange’s head of talent, remarked: 

Many similar companies in our industry have had to make some tough choices in recent months and Coinsquare has had to as well. The company has made the decision to part ways with a number of talented members of the Coinsquare team.

On January 8th, 2019, “instant” cryptocurrency exchange, ShapeShift announced it would be laying off around 37% of its staff members. ShapeShift’s CEO, Erik Voorhees, noted that the cutbacks in employees were “a deep and painful reduction, mirrored across many crypto companies in this latest bear market cycle.”

Voorhees, an early bitcoin adopter, explained that ShapeShift had “grown too fast” and that “by the time [the firm] learned to manage a 10-person team”, they had already added more personnel to their payroll.

Voorhees acknowledged that ShapeShift had “grown too fast” and that “by the time [the company] learned to manage a 10-person team”, they had already hired more employees. He added that the company’s “understanding of how to organize people grew, but not as fast as the people.”

Voorhees also pointed out that ShapeShift’s management made the critical mistake of not diversifying its invested capital. He remarked:

As a company, our greatest and worst financial decision is the same: to embrace substantial exposure to crypto assets. Much of our balance sheet is comprised of them.

Remaining Bullish 

Despite the cryptocurrency ecosystem's less-than-stellar performance in the last 411 days, many in the space remain bullish as there's a lot to look forward to. Bitcoin's layer-two scaling solution, the Lightning Network (LN) has surpassed a 600 BTC capacity this while, while the CBOE has resubmitted a proposal to list the VanEck-SolidX Bitcoin ETF.

Moreover, Fidelity Investments, a financial services giant with over $7.2 trillion of client assets under management (MAU), has revealed its crypto trading and custody platform is already "serving select clients." Bakkt, the Intercontinental Exchange's (ICE) cryptocurrency venture, is set to launch later on this year. The platform is set to help retail investors gain exposure to the space, while facilitating cryptocurrency adoption.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

Featured Image Credit: Photo via Pixabay.com