The Emerging World Of Cryptocurrencies: Behaviors, Patterns, and Paradigms Every Investor Must Know

The cryptocurrency industry is still relatively new, and as such, concepts and patterns are still emerging. As an investor, here are some vital insights you need to know.

Presently, cryptoassets’ price co-movement is quite high, most probably due to the launch of the cryptoassets market and the participants’ weak pricing ability.

Almost 7% of these cryptoassets are held by the institutional investors, which makes an almost one-thirteenth portion of the U.S. stock market’s institutional holdings ratio.

The high turnover rates of cryptoassets as compared to the traditional markets indicate that the crypto asset industry participants are either more active or reactionary.

But the UTXO (unspent output from bitcoin transactions) metric indicates that due to HODLing, these members becoming active only when the prices recover.

Reasons for Correlation

Studies have found that the low internal correlation between some of the cryptoassets can be due to three major reasons:

  • Idiosyncratic factors: These are the project-specified catalysts and news that can affect the level of correlation between cryptoassets.
  • Binance Effect: Usually the digital assets that are listed on Binance have a high correlation between them, whereas, the assets that are not listed have low correlations compared to the former.
  • Consensus Mechanisms: The consensus mechanism of cryptoassets can have a high impact on its correlation with the other cryptoassets return.

The overall correlation in the cryptoassets market has observably increased. It can be due to the gradual decrease of the market’s Bitcoin dominated trading pairs reliance or the simultaneous rise of the volume of stablecoins across all cryptoassets markets.

The correlation cycle among cryptoassets and the effect that market structure can have on this cycle is discussed further in the following:

1.Cyclic Moments and Turning Points

One of the factors responsible for the continuous fluctuation of the correlation among the USD price of cryptoassets is market irrationality. The market rationality has a similar effect as the co-movement phenomenon or herding effect.

Studies show that when the correlation among altcoins reaches a specific point, the Bitcoin trend for USD either reverse or comes to a halt at the previous price. This indicates the emergent market’s inherent traits as well as the irrational behavior of the market participants.

However, it is very early to say that there is some causal relationship between market reversals and peaks in correlation.

2.Disproportional Percentage Of Retail Investors

The frequent extreme correlation periods of cryptomarket are related to the highly retail-driven participation of the market. According to the recent data, almost 700 crypto funds are operating in today ‘s cryptomarket, but the January 2019 asset was thought to be $10 billion only.

Assuming that all of them hold only Bitcoin, the total upper bound of the Bitcoin market value will be 14% only. But if Altcoins are also included, the overall institutional proportion for the cryptoassets market can become even less than 7%.

It can be said that non-professional investors can become overtly cynical or overconfident while reacting to market trends. And that can lead to a high potential transactional volume and more volatile prices.

Whereas, crypto investors are more attentive and active towards new developments in the market, they have a significant impact on the success of their participating crypto networks and promote their voice to get heard, even through simple price action.

3.HODLing by Crypto Investors

HODLing refers to the phenomenon of the crypto investors where they prefer to HODL their assets when there is a decline in price until the prices are recovered.

And they become active when the high prices are restored. Most crypto investors tend to HODL the currency in bear markets that lead to moderate changes in UTXO cap.

But the UTXO cap decline can go steeper if the individuals transact with Bitcoin at comparatively low USD value prices. Not to ignore the fact that after a certain bear period, the rate does not go up that quickly, until at least the underlying rates reach the previous heights.

Herding behavior effects are situation specified. The initial correct information will cause a herding effect to reflect the information more quickly in the price.

Comparing this to the traditional market, the cryptoasset market has faced several issues during tits small lifetime, like:

-There is a lack of popular trading instruments of the market, an absence of a compulsory mechanism of disclosure that should be followed by all the market participants, and inadequate protection measures. All these factors lead to a reduction in the enthusiasm of the investors.

-The highly complex blockchain industry has a high barrier for new entrants. Also, there is a lack of professional and reliable media sources that leads to slow transmission of information and even extensive fake news dispersal.

-The limited arbitrage channel is another problem. The inherent limitation of cost of the mainstream coins or speed of transfer, temporary paucity of appropriate derivatives and an in-depth, and regulatory restrictions imposed by many countries lead to asset prices stymieing for a long time period in an unreasonable state.

However, the cross-exchange arbitrage chances were seen to be decreased during 2018, resulting in a higher price efficiency.

Takeaways

Because of the above-mentioned aspects, the effect that quick reacting market participants have become more distinct, making it more difficult to price the individual cryptoasset accurately.

Therefore, the herding behavior or so-called irrational attitude must not be blamed only on the inexperienced participants, but the market immaturity and infrastructure should also be on the front burner.

Especially after 2018, many regulatory bodies, media outlets, and research institutes have started to pay more attention to the blockchain industry. Also, there is a wave of crypto-native research and coverage growing with every passing day.

This rapidly developing industry has been able to attract new support and funds from various traditional and governmental capital sources and seems to continue doing so with every new step of improved data, news reliability, regulatory clarity, and less usability friction, which leads to a market with more efficient price discovery as a whole.

Various ongoing and completed researches and studies provide enough data to analyze and assess the progress of the space during the last few quarters.

As many mature financial products get rolled out, which covers the industry, there is a clearer worldwide regulatory framework, which means a rapid maturing of the crypto market than ever.

Gb Adolph Obasogie is the CEO of Harrison Global Capital

.

Hail A Ride, Rideshare, And the Fundamentals of Blockchain Intervention

Rideshare needs a redefinition, and blockchaincan make a difference.

The Need for a Blockchain-Driven Ride Share

Anybody with a smartphone and one of these company’s application can easily communicate with logged drivers to order for rides that correspond to the routes of operation of that particular driver. 

It is general knowledge that ridesharing has gradually crept into our lives and culture and become integrated into our daily movement and way of operation. 

The application network serves as a platform to develop a sense of responsibility and trust between the drivers and the passengers.

There are now companies that have risen above order and serve as the frontier for this industry.  Companies like Uber and Lyft have erupted in popularity and financial alike.

The Multi-billion Dollars Business

Typically, companies like Uber and Lyft has become household names and risen to the status of top brands and companies to be reckoned with around the world.  

They are the top players in the space of ridesharing, with Lyft being valued at $15.1 billion and Uber valued at about $72 billion.

Those are large chunks of market share and these platforms have weathered the storms of criticism until now.

Although opposition to ridesharing services has come under the light of skepticism in functionality and structure, more needs to be done.

Uber, for example, being banned in major cities around the world like Barcelona, Vancouver, Frankfurt, and some other cities. 

The major antagonists to ride share service companies have been Public transport services and Taxi companies, as ridesharing takes away a large chunk of their consumer market. 

Although right now, is not an only taxi and public transport companies that they have to be cautious about because they are on a route to being out of the market by new innovative companies using Blockchain technology to revolutionize the space. 

These big companies hence face a giant hurdle in terms of Blockchain technology and how it can seriously hurt their business model.

What Does Blockchain Do?

Blockchain has become quite popular in today’s world probably because of bitcoin and it’s outrageous pricing in 2017, but let’s talk about the blockchain framework itself.

 So, blockchain offers a decentralized, open, and distributed ledger that records transactions between two entities inaccessible, retrievable and permanent fashion.

 Each of this growing transaction is linked to one another using cryptography.  These transactions are extensively secure and usually do not require the third party and hence are more cost-effective.

They could be much cheaper than traditional ridesharing platforms and therein lies the punch that could potentially knock out the big players like Uber and Lyft.

How Blockchain can Influence Ride Share

Talk about a disruption much like the Internet did in the late 1990s or the airplane by the Wright brothers in 1903. 

Blockchain is here to stay and is currently reshaping and redefining the ways people view and understand companies & industries today. 

The ridesharing landscape is not left out on the list of industries being disrupted.  Of course, the only major hold back for now is worldwide adoption of Blockchain and cryptocurrencies.

These companies, Uber, Lyft, Wings & Sidecar operates a centralized system.  They are actually called Aggregators because what they do is, they serve as intermediaries between the drivers and potential customers.

The customers or passengers order for a ride on the company’s application on their smartphones with specific directions and the company supplies a list of drivers with different ratings for you to select from.  

Then you choose the driver and pay through the same application on your smartphone.

The company then receives the money, take a percentage and pay the driver. Hence these companies serve as a centralized site for the linking and completion of the transaction.  

They usually have the software, routers, and servers for reception and distribution of these orders.

What the blockchain framework can do in this space is to eliminate the middlemen or intermediaries, in this case, being Uber, Lyft, or Wingz. Blockchain creates a decentralized ledger that stores transactions securely in blocks.

And each block having a time stamp of the previous one so that they are linked, and one cannot be accessed without going through the other.  Hence, this provides a fortified and impenetrable network.

Due to the fact that the data is not stored in one place but dispersed through a network of computers, there is no aggregator or centralized unit needed.

Providers of driving services can simply provide a profile of the routes they cover ratings by previous customers, charge, and connect straight to passengers on the blockchain platform 

The passenger can request a service, then the Blockchain platform could filter according to the categories and produce a list from which he can choose from. 

Although there are still some touches to be added to this model before it becomes functional. But it’s a highly better alternative to the traditional. 

The transaction or payment end can be done through the peer-to-peer payment technology already built into the system.

Regulation of Ride Share Companies

These rides share service companies have come under heavy criticism to be regulated by a designated government body.

Reason being that there has been reports of cases where drivers have assaulted and been violent toward passengers, there has also been much talk over the inspection  of Uber vehicles to ensure the safety of users of the platform and insurance coverage of the vehicle.

Also, there is the fee that the companies deduct from the payment before paying the drivers.

All these can be highly minimalized with blockchain as there would be little or no charges as the transaction would occur directly between the drivers and passengers, and there would be more stringent measures to monitor insurance covers and the general safety of Users.

Conclusion

It is certain that the ridesharing space is going to disrupt as the full adoption of Blockchain services begin to play out in the coming decades and traditional rideshare service companies need to take note of this or else they would be out of business by this force.

Blockchain-driven rideshare service is going to be a plus to the services being offered and hopefully, will be the change that people want to see.