Bullish and Purgatory Phase for Cryptos?

One of the things that made cryptocurrencies exciting and alarming at the same time is its price volatility. In fact, many don’t consider cryptocurrencies as a smart investment mainly because of its price swings. Though Bitcoin almost reached $20,000 in mid-December, it has declined to half of its price after series of regulatory changes and other issues involving cryptocurrency exchanges.

However, if you will ask Thomas Lee, the head of research at Fundstrat Global Advisors, he believes that the bearish trend might be coming to an end. He explains that “first purgatory, then a bull market. While the bull of the decline is behind us, a bull market for altcoins, however, is not necessarily underway. In prior cycles, altcoins go through purgatory”.

Is There a Trend?

According to Lee, he believes that the limbo phase or purgatory that is marked by indecisive actions plays out for around 150 to 175 days before going back to a bullish trend.

He also mentioned that altcoins, as well as ICOs, are usually affected due to the heightened approach of regulators. Mostly, the regulatory changes come from Securities and Exchange Commission.

He mentioned that: “The reason for this longer duration is the current dark clouds overhanging crypto are really altcoin specific. The SEC has not provided full clarity on whether all ICO altcoins are security tokens (requiring registration). Moreover, the dozen or so investigations by the SEC on ICOs obviously creates headline risk. Hence, our strategy of sticking with large-cap tokens is likely to last throughout the summer”.

G20 Closing Statement

One of the good things that have significantly affected the price of cryptocurrencies recently is the G20 summit that was held in Buenos Aires. One of the recurring themes is blockchain tech and cryptocurrencies. For instance, it was determined that it should be classified as an asset rather than as a currency or security. Also, its risk was discussed. And for the good news, there are policy makers that showed avid support for blockchain.

During the closure of the event, a statement was issued regarding cryptocurrencies:

“We acknowledge that technological innovation, including that underlying crypto-assets, has the potential to improve the efficiency and inclusiveness of the financial system and the economy more broadly. Crypto-assets do, however, raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing. Crypto-assets lack the key attributes of sovereign currencies. At some point they could have financial stability implications. We commit to implement the FATF standards as they apply to crypto-assets, look forward to the FATF review of those standards, and call on the FATF to advance global implementation. We call on international standard-setting bodies (SSBs) to continue their monitoring of crypto-assets and their risks, according to their mandates, and assess multilateral responses as needed”.

And right after this statement, Bitcoin was able to break $9,000 after weekend of lows. The governor of the Central Bank of Argentina, Federico Sturzenegger mentioned that “The spirit of the discussion was very productive, and I agree that everybody left very pleased”.

But of course, there are still a lot of questions regarding cryptocurrencies. For instance, how far will the bullish trend go before it hits purgatory phase again?