Why Did the Cryptocurrency Market Grow by More Than 1200% in 2017?
November 19, 2017
It is well-known that this year the value of the cryptocurrency market has increased by more than 1200%. According to CoinMarketCap, the total market capitalization of digital currencies has grown to $230.9 billion. But what are the reasons for it? That’s the question.
Explaining such a growth in the market, analysts pointed out several factors. Most of them considered the growing openness and public interest as the main reason why the digital currency market is growing in price. This is proved by Google Trends’ data, which show that the number of web search queries for the word 'Bitcoin' has broken a record.
"The boom on the market is reinforcing traffic, as more people are trying to understand this market and make profit from it," said Matthew Unger, founder and CEO of iComply Investor Services Inc.
"I think that the rise in prices and the growth of interest satisfy each other and complement each other," said Iqbal Gandham, the managing director of the eToro social trading platform. "As long as the digital currency grows in price, it arouses interest of market observers, and this, in turn, contributes to further price hikes," he added.
In fact, this year there is a great inflow of investments appeared on the digital currency market, which has thereafter influenced the overall market capitalization of these assets. Several analysts note that the number of investments in cryptocurrencies made by institutional investors is getting higher and higher.
In addition, famous currency trader Marius Rupsis said, "Investments are coming from two types of investors: retail and institutional. In the first half of the year, retail investors from China, Korea and Japan raised prices of cryptocurrencies. In the second half of the year, institutional money began to arrive, as well as great investments from the US retail trade."
Besides, Jacob Elisoff, the manager of the cryptocurrency fund, commented on the growing number of institutional participants. "The rapidly increasing investments come, for the most part, from traditional sources: hedge funds, family offices, individuals. And soon they will also appear from banks, pension funds and sovereign funds," he said.
The growth in number of ICOs has also brought a huge profit to the cryptocurrency market. First, ICO creates a new value for the cryptocurrency market, when tokens are sold and quantified in monetary terms. Second, the participation in ICO means the exchange of bitcoin and ethereum with new digital tokens, which consequently leads to the development of these major cryptocurrencies.
However, against this positive background, the fear of a bubble causes worry among experts. For example, Jacob Elisoff said, “The history of cryptocurrency contained a lot of sharp price swings both up and down in the year 2011, 2013, etc., and many observers and me in particular think that now there is a turning point for the whole market. A bubble, to be more exact.”
Further, he predicted that the significant part of the earned profit in 2017 is likely to be lost as a result of drop in prices during the next year.