Not a day goes by without hearing about crypto assets in trouble. Too often, the Bitcoin has been announced as dead and yet it seems that it is constantly rising from its ashes!
Many actors in the banking sector (or in “traditional” finance) such as Jamie Dimon, Nouriel Roubini or Warren Buffet criticize the existence and usefulness of digital currencies. Would they be embarrassed by the arrival of a serious competitor or would they use their media aura to manipulate the prices of the market ?
These questions remain unanswered. However, while the market has suffered a sharp drop since, what some call, the bursting of the bubble in January 2018, it is essential to remember that many players are very confident about the future of the blockchain and more particularly of the crypto-assets. They are right.
The applications are so numerous and meet real needs in various sectors, which leads us to argue that the blockchain, and therefore crypto-assets, represent a real revolution comparable to that of the Internet.
This comparison is also true among the many rumors and negative comments that could be heard about Internet technology when the dot-com bubble in year 2000 broke out. And yet, to this day, all companies around the world and most people use this revolutionary technology on a daily basis.
This article aims to put things in context and shed light on the current situation and on the potential of the crypto-assets market.
A Free-Fall Market That Relies On The Point Of View
If we look at the market as a whole, we see that it has grown steadily over the past 4 years and its total market capitalization has increased.
The crypto-assets market capitalization has increased by more than 1400% since January 2017
Moreover, we can easily observe a that the prices of crypto in US dollars have been increasing in a middle term view ; even if the volatility of this asset is much more consequent than the one of traditional financial assets.
For instance, in the tab below are the exchanged prices observed in January every year since 2010 (the first BTC exchanges) for Bitcoin & Nasdaq.
We observe that whereas the Nasdaq changes in % are between -1,76 and 33,22 ; the ones of Bitcoin are between -68,94 and 5692,78. The bitcoin may just represent a more risky asset than the ones of traditional financial markets.
If we look at it from a global point of view and not from a monthly perspective, we can only observe that the market of cryptocurrencies is growing.
From 2015 to 2018, Nasdaq index has increased by 55% whereas BTC price increased by 1227%.
And this, despite the falls we can observe and which are to be put into perspective.
For example, if we look at the price only in the last few months, the market could be misinterpreted. Once again, a step back and a global perspective is necessary.
Indeed, Bitcoin, after reaching a record price of $20,089 on December 17, 2017, fell to $5826 on June 24, 2018 : a drop of exactly 71%.
For some, this event was a harbinger of the death of cryptocurrencies, whose total capitalization was also greatly impacted.
However, this was not the first hard hit for Bitcoin. As a reminder, this one had already suffered two larger falls. The most violent one happened between July 8, 2011, and November 18, 2012 : -93% in 133 days.
Nevertheless, this drop did not prevent it from catching up with its initial price in just a few months and beating a new record in December 2013 : its price increased by 1615% between July 6, 2013, and December 4, 2013. These scenarios have been repeated many times as you can see on this table:
List of Bitcoin major corrections > 40% (From ATH Level) since July 2011
Correction Period > 40%
Sources from :
What could be considered as worrying would be an absence of volume. This would mean the end of liquidity for crypto assets holders ; and inevitably the end of crypto assets trading. What we observe instead is that in terms of daily volumes traded on the market, all combined cryptocurrencies have increased significantly.
The average daily volume in 2018 actually increased by 300% compared to the one of 2017
from an average of 3 billion dollars per day to 12 billion dollars per day, and it doesn’t take into account the volume peaks observed between December 2017 and February 2018.
In addition, the volumes traded and price volatility seem to have stabilized, particularly since March 2018. These elements testify the good health of the market and an increased interest in cryptocurrencies.
A Market That Doesn’t Slow Down That Much
The figures speak for themselves and more and more citizens, companies, banks and countries are taking an interest in the blockchain and the crypto-assets. The period of fear seems to be calming down and it could open the path to a period of mass adoption.
As the research firm Gartner said in its latest “Hype Cycle for Emerging Technologies” report, blockchain technology is at the edge of the “trough of disillusionment” phase in the cycle, though it predicts that the technology may reach the “plateau of productivity” within the next decade.
Moreover, the number of startups financed by ICOs (Initial Coin Offering) is constantly increasing.
These new blockchain companies see ICOs as a fast and efficient way to finance their projects. These projects are all still in development stage and will be implemented in the coming years. Patience is required, but also necessary to obtain operational and safe products and services.
The cryptocurrency market, which is a very young market (only 10 years) still has a bright future ahead of itself. First, compared to previous years, the current performance does not seem to worry, it is even very largely positive and reassuring. On the other hand, the demand for this technology continues to grow over the years and meets real needs that should not be ignored. In a world that is changing fast, it is necessary to take a step back and look at the future rather than rely on pessimistic figures and announcements, most of which are based on very short term and appealing to emotions.
PS : for the ones that still aren’t convinced of the crypto assets market potential, please have a look at this tab showing the share price drop of several companies you may recognize, after the bursting of the Internet bubble :
Indeed, several don’t exist anymore… We can imagine that while it may be the fate of some “shit coins”, tomorrow’s GAFA lie in today’s crypto assets market.