Cryptocurrency trading volumes, key factors for 2019 - from iFX EXPO

Recently, CBDO Ksenia Semenova spoke at a panel on algo trading and prediction tools at iFX EXPO in Hong Kong. The Cindicator team also prepared some comments on cryptocurrency trading volumes.

Ksenia’s fellow panellists were Benoît Brookens III, Founder and CEO of Accrue, Yaron Golgher, Co-Founder and CEO of I Know First, and Tiantian Kullander, Founding Partner of Amber AI.

Ahead of the event, Cindicator’s internal team of professional financial analysts and traders put together their views on what’s next for the crypto market. It was more than the panel could cover, so we’re sharing their insights below.

Cryptocurrency trading volumes: what to expect in 2019

Crypto trading volumes reached new highs in 2018. What could be the catalysts for setting new records in trading volumes in 2019 and beyond?

Yan Petretskiy, financial analyst at Cindicator:

Trading volume can be an uncertain metric, as reports suggest that a lot of the exchanges use wash trading to attract new people.

We can trust the reported crypto volumes in just two cases:

• CME and CBOE futures contracts;
• Decentralised exchanges.

However both of the above have very low volumes compared to classic centralised spot markets.

On the other hand, 2018 was a year of growth for the OTC desks, and a lot of liquidity from big players moved there. Today, every big exchange has its own OTC desk.

All these things together make it very difficult to calculate the real volumes for Bitcoin, Ethereum and a couple of other top assets.

Meanwhile, altcoin liquidity dropped significantly, comparing to the first half of 2018. It’s most likely driven by the downtrend – retail investors are just not as interested in this market as before. And the big players who are still interested in Bitcoin and Ethereum don’t want to buy low-liquidity altcoins.

New cryptocurrency volumes records may be driven by:

• New trading instruments and markets, including stablecoins, which can be used as a gateway for institutional money;
• Increased crypto adoption (unlikely to happen at a large scale in the next 6 months) and utility token adoption;
• A potential new bull market, which will attract investors (for example a security token boom).

Chris, financial analyst at Cindicator:

I think for setting new records in 2019 we need a higher utilisation of cryptocurrencies in real economic activities and a more relevant entrance for institutional investors in crypto assets.

Record volumes, which were reached somewhere between the end of 2017 and the beginning of 2018, were fuelled by speculation and price manipulation, both helped by the lack of regulation and financial education.

In 2019, thinking that the real usage of decentralised projects will be the key determinant for setting a new trading volumes record seems utopian given the early stage of the whole sector. Therefore, a safer bet is that the probability of seeing new highs is mostly positively correlated with the full entrance of institutional investors in the crypto ecosystem.

Key factors for driving the market higher or lower

What are the key determinant factors to look for driving the crypto market higher or lower in the short term (the next one to six months) and the medium term (the next 6–12 months)?

Yan:

In the short term, a lot of market participants in the crypto space are awaiting new infrastructure developments such as the launch of Bakkt, bringing additional institutional money into the space.

In the medium and long term, it’s adoption, regulation and changing the narrative. Currently, we are seeing a disappointment in the performance of ICOs and their utility tokens after the hype at the end of 2017 and the beginning of 2018. The new technology stack provided by Ethereum had a strong hand in this but the narrative that Ethereum is only needed for ICOs is not correct. In my personal opinion decentralised finance applications, built mostly on top of Ethereum, is one of the most promising and undervalued niches in the market right now. I see a lot of opportunities for adoption there.

Chris:

In the short term, i.e. the next one to six months, I would highlight the following factors for driving the price:

• Higher: the entrance of institutional investors, new financial instruments based on cryptos and positive regulatory developments around the world;
• Lower: frauds, lack of crypto project developments, and new bans from the regulators.

In the medium term, as in the next 6–12 months:

• Higher: the same as the short term factors plus new financial education programmes, a greater acceptance of cryptos by the real economy and launches of several crypto projects;
• Lower: the same as for the short term.

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