Monthly Crypto Commentary — May 2019

It’s a party like it’s 2017 as the crypto market gains 58.4% in May. Is it time for a more severe market correction?

Quick summary

  • Returns in May marked the best monthly crypto market performance since December 2017.

  • At this point, a larger pullback would be healthy for the long-term development of the market.

  • A substantial increase in demand for cryptocurrencies is expected in the coming months.

Market overview

Developments in May resembled those in 2017. The month started with a bang as the crypto market gained 52% in the first 15 days. This huge move was followed by 10 days of consolidation, after which the prices continued to appreciate, and the market ended the month with a gain of 58.4%. For comparison, the average monthly performance in 2017 was 36%.

Crypto market performance | May 2019

We noticed another change of dynamics in May. At the beginning of the month, Bitcoin continued to outperform the market, but then the altcoins started taking the lead. This was especially evident in the last week of the month, and it is a sign that investors’ appetite for risk is increasing. More people are starting to believe that we are in a new bull market, which in turn increases the demand and propels the prices higher.

Market sentiment remains strong

The Binance hack, which occurred on 7 May, is probably the most definite indicator in recent months that we are in a bull market. After the news broke out, the market lost 4% of its value and then recovered in only two days. Binance Coin initially lost 12%, and the recovery took less than four days. If this event had occurred during the bear market, it would have had a devastating effect on the prices. But now, the market quickly shrugged off the bad news and continued with its bull run.

Market pullbacks are important

Is it time for a more severe market correction? Considering the parabolic move in the first five months of 2019, a larger pullback would, in fact, be healthy. I have been stating this quite often lately, and people keep asking me, why do I wish for this to happen. Let me explain. If the prices continue to increase without occasional corrections, we will eventually experience a very severe market pullback. Such a development could startle the investors and draw out the old fears of the bear market. This could shift the market sentiment to negative and actually spur the continuation of the bear market. Therefore, regular smaller pullbacks are more favorable since they cannot uproot the positive market sentiment.

Taking into account the new market developments in June, it looks like that the anticipated market correction has indeed already started. The market lost 15% of its value in five days, and it will be interesting to see how this plays out. Is the current bull market over? I do not think so. I believe that we are, in fact, in a very early stage of the new bull market and that it still has a long way to go. I also believe that the magnitude of the current bull market will surprise many people.

Conclusion

As I stated in my previous monthly commentary, it is best to stay long in the current environment. Getting out of the market is the easy part but pondering the decision on when to re-enter it, usually results in missing out on a large part of the market gains. We can expect a significant increase in demand for cryptocurrencies in the coming months. Some of the largest US brokers, like Fidelity, TD Ameritrade, and E*Trade, will launch the cryptocurrency trading. Yahoo and Rakuten are launching their own crypto exchanges in Japan. These companies alone will provide access to cryptocurrencies to millions of people, and there are many other large businesses planning to offer crypto trading to their clients. One does not have to be a rocket scientist to evaluate how this would affect the crypto prices in the future.


Watch Gregor explain this topic on video:

 

Solidum Capital also manages the Solidum Prime Crypto Fund on the ICONOMI platform. You are welcome to read the Solidum Prime Monthly Report for May 2019 and why now is the best time to invest.

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DISCLAIMER: This article is for informational and discussion purposes only and does not constitute a marketing message, an investment survey, an investment recommendation, or investment advice. The article was prepared exclusively for a better understanding of market dynamics.

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