About two weeks to the end of the year, it seems its about time we put to bed arguments about the short-term future of bitcoin.
The current crash in crypto markets—led by bitcoin, by far the largest cryptocurrency—has defied pretty much all bullish predictions made at the beginning of the year.
A lot of these predictions came on the back of an impressive 2017, undoubtedly the best year for cryptocurrency. The year had started with little expectations but by mid-year, it was obvious the market was up to something big. Bitcoin prices will ride majorly on positive speculations and an unprecedented interest in cryptos to reach an all-time high (ATH) of nearly $20,000.
Needless to say, bitcoin’s far exceeded most bullish predictions for bitcoin heading into the year—and they were relatively few.
High Expectations for 2018
Analysts will be forgiven for the lofty predictions for 2018 year-end. Tracing the pattern of 2017, analysts suggested that bitcoin will hit prices as high as $250,000 which is over 1000 percent gain from the ATH. Placed side by side with a 2500 percent growth achieved the previous year, these predictions as outrageous as they may sound were actually conservative. The fact that bitcoin started is downward spiral December last year did little to affect the bullish outlook—after all BTC had witnessed several corrections on its way to its high.
2018 has turned out very Different
As it turns out, the downturn noticed towards the end of 2017 was not just a big correction but the start of a year-long downtrend which will take away most of the gains of that year. Many cryptocurrencies have replaced yearly lows with newer yearly lows, some losing up to 95 percent of the gains from their all-time highs. Attempts at a resurgence have failed followed with sub-crashes mush to the disgust of bullish crypto supporters.
Why Long-term perspective is important
If it makes anyone feel better, crypto markets are still way better than they were at the start of 2017. The total crypto market stands at just over $104 billion today; at the start of last year, it was well under $20,000 billion. A recent analysis reported by Smartereum show that bitcoin outperformed the stocks of established tech giants like Apple and Alphabet (the parent firm of Google) from January last year. In the ten years of bitcoin’s existence, its price has risen from the fraction of the dollar to a couple thousands of it. And a lot of this growth has happened when there was little knowledge of cryptocurrency; you’d be forgiven if you thought bitcoin existed only from last year.
Bitcoin and cryptocurrency could still reach—and I dare say, exceed—the high expectations set for it by the most bullish of followers. But it doesn’t have to happen in a couple of months or years. Cryptocurrency can become unprecedentedly successful in a transformed form, under different conditions and after a series of activities within and outside the cryptosphere.
Simply put, the success of crypto markets may lie in its evolution, and evolution takes time even in today’s fast-paced society.
Sanitizing the Crypto Space
One positive that can be taken from the turbulent year will be the pruning it brings along with it. The cash crunch affecting crypto space serves to rid the space of elements who are into it solely for financial gains—that is the bitcoin wealth seekers. Many argue that it will transform crypto markets from a speculation-based market to more of a substance-based environment.
BUIDL to the Rescue?
Despite the market crash, cryptosphere has not turned into a ghost town. If anything, the cryptocurrency is more than ever focused on the single most important factor that can guarantee sustained success not just for crypto but in every sphere. This strategy? Building real-life applications.
This is the umpteenth time you probably heard the phrase “real-life applications” used in blockchain circles. But the tragedy is how much this very primal aspect of growth was neglected during the cryptocurrency boom. Crypto observers agree that the market was driven by speculations and an even worse factor FOMO—the ‘fear of missing out’. Investors heaped millions into several ICOs so as to get a share of the crypto pie without observing due diligence.
At the time, due diligence was reduced to little more than confirmation of team member and social media following. Many projects which raised millions then still don’t have a working product today.
Drawing parallels once again with the internet and internet businesses, we see that the successful businesses years after the dot-com boom are those achieved day-to-day use and not some of the radical-sounding projects which turned out to become white elephants. The likes of Facebook, Google and Microsoft seem to have attained a status of “indispensability”. That the latter is now the most valuable company in the world understates the importance of useful applications.
With developers, numbering in the hundreds of thousands, continue working assiduously on cryptocurrency projects, it wouldn’t be long till the next big thing globally happens to be a crypto thing.
Crypto can reach a Compromise with Government Regulators
While a level of decentralization is welcome, a total decentralization which crypto purists advocate for runs afoul of established societal norms built over centuries and as such will be resisted for the foreseeable future.
Crypto critics have often predicated their doom prediction on the eventual attack on cryptocurrency by governments, central banks and other centralized institutions that control the economy today. Jamie Damon, the CEO of J. P. Morgan and vocal critic of bitcoin, predicted that governments across the world will clamp down on cryptocurrency leading to the demise of the “bubble”.
To say regulations are giving crypto development a hard time will be an understatement. Apart from countries like China and Russia which have put their foot down on crypto activities, many other counties are cautious, even critical towards crypto. One need not any further ICOs to see the impact stringent regulations can have on crypto activities.
The once-booming source of crowdfunding for blockchain projects is only a shadow of its former self as ICOs bring in in record low investments month after month since the second half of 2018. Yet we see some other governments like reforming regulations in other to benefit from ICOs and cryptocurrency businesses that come as a result.
Cryptocurrency does not have to pit itself against these powerful forces especially during its infant—and consequently vulnerable—stage.
If ICOs were SEC-compliant, following the rules of financial and securities regulators, and not the dissident figure they have been portrayed, then they will not be given such a bad rap by governments. But then they will no longer be ICOs; they will tend towards STOs—Security Token Offerings.
Security Tokens are defined as on-chain tokens that denote real-world assets. These are basically tokens which pass the infamous Howey test. They are the key to the era of Tokenization. In his TechCrunch article “Yesterday’s ‘plastics’ are today’s crypto tokens”, Chris McCoy CEO of Footprint and the creator of Storecoin, pictured a time when real-world assets will be represented by cryptocurrency tokens like bitcoin and ether. He portrayed a future when one can tokenize virtually anything ranging from unused bedrooms, cars to access to one’s phones and attach monetary values to them.
Hope for Cryptocurrency in the Long-term
Recently we were treated to the news of Erik Finman, the teenage bitcoin millionaire who said that bitcoin’s long-term outlook is bleak. “Bitcoin is dead, it’s too fragmented, there’s tons of infighting I just don’t think it will last,” he was quoted as saying adding that “[bitcoin] may have a bull market or two left in it, but long-term, it’s dead.”
The young man who is famous for turning $1,000 into more than $4 million via bitcoin his little against cryptocurrency in general though as he seemed to nitpick select coins like bitcoin and litecoin while stating that tokens like ether [ETH] and Zcash [ZEC] have the best chance at long-term success.
The crash of 2018 is devastating but it is not fatal. In years to come, we may look back to it as we look back to other crypto crashes in the past which have also had devastating effects.
But when will that be?
It’s almost impossible to tell but one thing seems certain, cryptocurrency’s best chance lies in the long-term.
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