Canaccord's Cryptocurrency Observations: Regulation, Bitcoin Patterns, Demand For Altcoins

The first quarter of 2018 has been typically volatile for cryptocurrency investors. Unlike previous quarters, the volatility didn’t result in higher prices across the board.

In its latest Cryptocurrency Quarterly report, Canaccord Genuity analyst Michael Graham said there were three key themes that dominated the crypto market in the opening months of 2018:

• The prospect of more global cryptocurrency regulation is weighing on investor sentiment.
• A long-term look at bitcoin’s price history suggests a pattern of months of sideways price consolidation followed by short, large breakouts to new highs.
• The market needs demand for altcoins to justify their massive market caps.

Negative Headlines

In the first quarter, headlines in the crypto space were mostly negative, which was reflected in the price action of the currencies themselves. The primary regulatory discussions centered on the U.S. and South Korea, two of the largest crypto markets in the world. South Korea witnessed a significant drop in trading volume following a government crackdown. Yet while doors are closing in Asia, U.S. traders now have access to bitcoin futures contracts, which were launched by CBOE and CME in December, Graham said. (See the analyst's track record here.)

“With the exception of bitcoin, the cryptoassets market right now is the equivalent of hundreds of stocks trading at significant market values without any revenue,” Graham said.

Altcoins have taken a major bite out of bitcoin’s dominant share in recent months, he said: Bitcoin represented about 53 percent of the global crypto market cap in November, but its share is down to just 35 percent today.

After the volatile start to the year, the price of bitcoin is down 17.2 percent year-to-date, and the Bitcoin Investment Trust GBTC is down 8.8 percent in the same period.

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