After enjoying a strong bull market rally during the first six months of 2019, cryptocurrencies experienced a sizeable decline during the month of July. It was not a good month for crypto traders and investors. All of the major crypto results for July generated losses. The average loss was (24.9%). Monero was the best performer for the month while Zcash turned in the worst performance. What was the driving force behind the crypto decline? Can we expect these losses to continue? Let’s examine the details.
Facebook’s Libra Creates Crypto Volatility
Without question, the biggest news story during the month of July was Facebook’s attempt to seek regulatory approval for its digital currency, Libra. On 18th June, the company officially announced its intentions to enter the cryptocurrency universe by launching the Libra blockchain, which will be used exclusively to manage the Libra coin.
The initial response from the cryptocurrency community was overwhelmingly positive. The price of Bitcoin moved sharply higher following Facebook’s announcement. The price of BTC was 9,081 on the day of the announcement. One week later, on 25th June, the price had exploded to 11,790.
This represented a dramatic increase of 29.8%. The initial bullish response was based on the assumption that the cryptocurrency universe would experience a substantial increase in the number of Bitcoin and altcoin users. Why? Because Facebook has 2.41 billion active users. Consequently, many of these users would be introduced to cryptocurrencies for the first time through Libra.
Unfortunately, the Libra euphoria within the crypto community only lasted a few weeks. In mid-July, congressional lawmakers began raising concerns about Facebook’s inability to operate Libra under the appropriate regulatory framework.
On 17th July, Facebook representatives were required to testify before the House Financial Services Committee in Washington, DC. Specifically, David Marcus testified on Facebook’s behalf. Following the congressional testimony, the general consensus among the crypto community was that the vast majority of lawmakers were not the least bit optimistic about the future role of cryptocurrencies in the global economy. All cryptocurrencies immediately began to decline following Facebook’s testimony with members of congress.
The cryptocurrency community is beginning to realize that the future adoption of digital currencies within the global economy will probably take much longer than originally thought. The majority of governments around the world will most likely be very slow in approving cryptocurrency legislation.
Was July a Turning Point in the Crypto Bull Market?
Based on technical analysis, July was definitely not a good month for the cryptocurrency universe.
Let’s examine the technical performance of Bitcoin. The first six months of 2019 were very bullish for BTC from a technical perspective. The cryptocurrency was able to penetrate all of its major resistance levels. The numbers were 4,440 – 5,704 – 6,568 – 8,485 – 9,966.
In order to maintain its bullish momentum, Bitcoin needs to stay above these important resistance levels on a Friday closing basis. So far for 2019, BTC has reached a high of 13,844 on 26th June. Prices have been drifting lower for the past four weeks.
Unfortunately for the Bitcoin bulls, BTC suffered a Friday close below 9,966 on 26th July. This marks the first sign of trouble for the entire cryptocurrency universe. Bitcoin has always been considered the leader within the crypto community. Therefore, Bitcoin’s bearish reversal on 26th July could easily create selling pressure for all cryptocurrencies.
The cryptocurrency marketplace will remain bearish until BTC is able to create a Friday close above 13,844.
The most likely scenario for the remainder of 2019 is a trading range for all cryptocurrencies. The year 2017 was incredibly bullish for the crypto community. 2018 was extremely bearish. Therefore, historical analysis suggests that the remainder of 2019 will probably be rather uneventful.
Without question, cryptocurrencies are still in a multi-year bull market which could easily continue for the next decade. However, there will be several periods along the way where the price action is rather boring.
Don’t be surprised if cryptocurrencies have entered a period of consolidation which could last well into 2020.