Meow: Pinball Volatility and its Implications for ICOs
Surging Bitcoin prices and Ethereum-crashing-Cryptokitties may be bad news for ICOs in the short term but long-term implications are rosy
The ICO industry has faced two seemingly negative developments this month, yet on the longer term view both come with significant upshots. The price of Bitcoin has skyrocketed, strangling liquidity in the ICO market, while at the same time Cryptokitties has overloaded the Ethereum network slowing it down considerably and on a number of occasions halting transactions completely. While challenging, both of these events caused a massive increase in the cryptocurrency user base. Coinbase alone now boasts more accounts than the bank Charles Schwab. Once prices stabilize ICOs will have a much larger pool of potential token buyers to sell to.
Bitcoin’s astronomical rise has taken it the past month from a $5627 low on Coinmarketcap to a high of over $18,000. Since Bitcoin is rising so fast, investors are shifting a lot of their portfolio out of alternative coins and tokens, this has created a shortfall in liquidity given that most ICOs trade primarily for Bitcoin or Ethereum. But to focus on the immediate price surge and the instability of the exchanges would be to neglect the evidence of a huge number of new potential token buyers entering the cryptocurrency space. The number of new signups and purchase orders led to Coinbase going down due to “record high traffic.” The total market capitalization of cryptocurrency in the past month has more than doubled from $202.9BN on November 8, to $436.9BN on December 8.
On the other side of the knife, the popularity of Cryptokitties has hammered the Ethereum network, where collectable, breedable, and tradable “cats” are currently driving a staggering 14.8% of all transactions. On more than one occasion Cryptokitties brought the Ethereum network to a complete halt. This has even caused a number of ICOs to postpone their token sales until the network stabilizes. Yet Cryptokitties remarkably may go down in the history books as the first mainstream usage of crypto.
These massive developments will ultimately have a strong positive effect on the crypto space in general and on the ICO space in particular. Both are driving an army of new users into the crypto space. One of the most positive effects of Cryptokitties is the way that it is pushing vast numbers of new users into utilizing Metamask, which is not only one of the most popular Ethereum wallets, but is also one of the most popular ways to participate in ICOs. The widespread adoption of core tools for ICOs dramatically overcomes the barrier many users face when they try to enter the crypto space. As silly as Cryptokitties may sound, they are a powerful tool for overcoming this fundamental barrier and are doing so very effectively.
For the ICO community the fixation shouldn’t be on the spot price of Bitcoin, but on its increasing viability and popular acceptance. This is a bright time for the ICO game, even if trading in the immediate term is weak.
