Quick Thoughts On Cryptocurrency Market
And The Ups And Downs It May Hold
Cryptocurrencies have never been far away from the headlines over the recent year, and the hype about them doesn’t seem to die down any time soon. So what has been happening on the market of late and what is the coming time hold in store for the cryptos?
One of the pre-dominant features of the cryptocurrencies market is its volatility — some of the highest, as compared to other finance spheres. This is mainly due to the relative novelty of the topic itself — cryptocurrencies are a different kind of financial instruments than are assets, currencies, and collectibles all at the same time. Arising from a sphere that is initially not finance, they have little connection and codependency with the good old global financial system. That is another factor that makes the market unstable.
We’ve seen Bitcoin rise and fall dramatically over the recent years. But the global value of this most established cryptocurrency is only about 43 billion dollars. If Bitcoin is to crash totally, it will have more of a social impact than financial. Sure, some people will lose money, others might go to jail, but if or when this bubble pops, nothing global like the transatlantic crisis after the fall of CDOs in 2007–2008 will take place. So far. Steps influential governments take to regulate cryptocurrencies are yet still either cautious or prohibiting. All these factors stand as reasons why the events on the crypto market are usually tumultuous and at a scale that would devastate the global economy if they were to happen to established financial structures.
Let’s look at some numbers. At the beginning of 2017, the estimated volume of the global cryptomarket was about $18B, with Bitcoin having an 87% share in this. By the beginning of 2018, this changed to almost $600B, which is more than 3000% rise. Bitcoin’s piece of the pie reduced to 37% in June 2017 and then went slightly up again in December. We could definitely say that 2017 has been a year for altcoins.
So far the pattern is, that all the major coins, such as Ether, Cardano, Litecoin, Monero and some others are following Bitcoin in their rises and falls, with Monero having a slightly more independent graph. But this demonstrates that although there’s very little interdependency between cryptocurrencies and other global financial instruments so the crash of one will have little effect on others, cryptocurrencies themselves are extremely correlated. Which is not a good sign for them.
When asked about the future of Bitcoin and other existing cryptocurrencies, most analysts are skeptical. Goldman Sachs’ Steve Strongin predicts most cryptocurrencies falling to zero, not unlike dotcom bubble of the late 90s. Nouriel Robini, the economist who predicted the 2008 crisis well ahead, calls Bitcoin ‘the mother of all bubbles’. Few analysts deny though, that even if cryptocurrency market were to collapse, there will emerge at least a few key players, like Google and Amazon were born from the dotcom crash, but fully transformed. Can we be looking at such players now? Bitcoin is the pioneer and all pioneers have technical limitations, so does BTC, with its low transaction rate and high cost, and low emission cap. Ether seems to have more potential, being a utility token at the same time and having quite a few co-dependent projects which are built upon it. Telegram’s TON has been announced and Telegram’s ICO has already beat the current ICO record by a several times, and TON’s plans sound very ambitions, this seems to be the coin that may just pose an alternative for existing exchange systems, such as Visa and Mastercard.
Many view this as exciting news but also as a potential threat. Cryptomarket is developing much faster than adjustments in government regulations are introduced. Incoming of such a player is referred by many as a potential cause for uncontrolled trade, rise of black markets and grand-scale money laundering. Some even speculate that this was the actual cause behind Telegram’s ban in Russia.
However, as we have seen of late, governments are starting to turn a more friendly face towards cryptocurrencies, with South Korea leading the way in introducing more crypto-friendly policies. And even though Bitcoin has been destined to fall and crash by all and sundry in the world of business analytics, it has fallen and crashed and climbed back up and is still standing.
Still the trend for altcoins eating away at the market cap of the veterans like BTC and ETH is outlined quite clearly.
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