Since their peak in December last year, the values of leading digital currencies like Bitcoin and Ethereum have nearly halved. As of recent trading sessions, Bitcoin has been fluctuating around $7,610, while Ethereum hovers near the $607 mark.
A recent analysis by Morgan Stanley provides a detailed look into the current state of the digital currency market. Using multiple data visualizations, the report aims to uncover patterns and insights about the future of blockchain and cryptographic technologies.
Trading Volume: A Sharp Decline
Morgan Stanley’s report highlights a significant drop in trading activity for major cryptocurrencies. Both Bitcoin and Ethereum have experienced substantial declines in transaction volumes.
Historical data shows considerable volatility in trading volume for both currencies since their inception. After a dramatic surge last year, activity has now nearly returned to baseline levels. Bitcoin, in particular, once reached a peak daily trading volume of $6 billion but has since fallen back below $1 billion.
This decline in liquidity is critical for investors holding these assets. With trading volumes shrinking rapidly, large sell-offs by major holders could trigger market declines and further panic selling.
For instance, in mid-April, two large Bitcoin wallets sold approximately $100 million worth of Bitcoin within 24 hours. This caused Bitcoin’s price to drop by over $200 in just 20 minutes, pushing it below the $8,000 threshold.
Currency Pairs: The Role of Stablecoins
Another key insight from the report concerns the trading pairs used for Bitcoin transactions. Approximately 40% of Bitcoin trades are conducted using other cryptocurrencies rather than fiat currencies.
The data reveals that from 2012 to 2013, most Bitcoin trades were against the US dollar. In the following three years, the Chinese yuan became the dominant trading pair. By April 2016, the Japanese yen took the lead, and since November 2017, Tether has emerged as a significant player.
Tether is a type of digital token known as a stablecoin. Its creators claim that each Tether token is backed by one US dollar, meaning its market price is ideally stabilized at $1. This theoretically makes Tether less volatile than most other digital currencies.
Morgan Stanley has previously noted that Tether’s share of Bitcoin transactions increases notably during bear markets.
ICOs: High Risks and Major Losses
Initial Coin Offerings (ICOs) remain a central topic in the cryptocurrency ecosystem. Morgan Stanley points out that investor losses from failed ICOs have reached $630 million.
A Wall Street Journal investigation of 1,450 cryptocurrency companies found that 271 of them had ICO documentation containing "red flags." These included plagiarized documents, promises of guaranteed returns, and虚假 team member information.
Despite these warning signs, investors poured over $1 billion into these 271 questionable projects, suffering losses of at least $273 million.
The report further notes that 32% of ICOs launched in 2017 have already failed. Nevertheless, over the past 18 months, this unregulated form of fundraising remains popular, especially among blockchain startups.
Between 2012 and February 2018, venture capital-backed blockchain transactions outnumbered ICO-funded projects, accounting for 68% of deals compared to ICOs' 32%. However, ICOs have raised larger sums overall, representing 78% of total blockchain fundraising during that period, while venture capital accounted for just 22%.
Enterprise Adoption: Banks Exploring Blockchain
Beyond cryptocurrencies, established financial institutions are also experimenting with blockchain technology. Major banks, including JPMorgan, Wells Fargo, and even struggling institutions like Deutsche Bank, are testing blockchain applications in areas such as trade finance and equity swap transactions.
It is still too early to determine whether these initiatives will succeed, but the active exploration signals growing institutional interest in distributed ledger technology.
Frequently Asked Questions
What caused the drop in Bitcoin’s trading volume?
The decline is attributed to decreased speculative interest, regulatory uncertainty, and market maturation. As prices stabilized after a volatile period, many short-term traders exited the market.
How does Tether stabilize its value?
Tether is designed as a stablecoin backed by reserves of US dollars. Each Tether token is supposed to represent one dollar held in reserve, though this backing has been subject to controversy and audits.
Why do ICOs have such a high failure rate?
Many ICOs lack solid business models, regulatory compliance, or transparency. The ease of launching an ICO has led to low-quality projects and widespread fraud, resulting in significant investor losses.
Are major financial institutions adopting blockchain?
Yes, many large banks are experimenting with blockchain for use cases like cross-border payments, settlement processes, and fraud reduction. However, most projects are still in pilot stages.
What is the difference between ICO funding and venture capital?
ICOs raise funds from the public by selling tokens, often without regulatory oversight. Venture capital involves professional investors providing funding in exchange for equity, usually with more due diligence and governance.
Can blockchain succeed without cryptocurrencies?
Yes, blockchain technology can be used in permissioned or private settings without a native cryptocurrency. Many enterprises are exploring such applications for supply chain, identity verification, and data sharing.
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