Are Cryptocurrencies Recovering or is This a Dead cat Bounce?

No one can say there is such a thing as a boring day in the world of Bitcoin and cryptocurrency. After the onslaught of price declines throughout the weekend, we kick off this Monday on a positive note. All currencies are seemingly recovering their losses. The Bitcoin price surpassed US$2,000 again, but it looks like Ethereum is the winner of the day so far. Other currencies all doing quite well too, for now.

CRYPTOCURRENCY MARKET SEES A DEAD CAT BOUNCE

Even though we are not a big fan of the term “dead cat bounce“, it accurately describes what is going on in the cryptocurrency world right now, by the look of things. The markets are showing signs of positive momentum, but there is no reason to get overly excited just yet. After all, the gains made today can easily be wiped out in an hour or two of bearish trading. This is especially true for the currencies showing large gains compared to yesterday.

Taking a closer look at the charts, we can see there is only one coin in the top 50 without a green number next to it right now. Overall, that is a positive sign for cryptocurrency as a whole. At the same time, people have to keep in mind these positive changes are a direct result of the Bitcoin price going up slowly. Should Bitcoin drop in value again, these short-term gains for all altcoins will be wiped out pretty quickly.

While it is good to see the Bitcoin price bounce back to above US$2,000, maintaining that position will be quite challenging. There is a lot of negative pressure on the market, which may push the price back to to the US$1,900 range in the coming hours. Such a retrace will effectively prove to be a tough time for any altcoin struggling as of late, including the likes of Ethereum and Dash.

Speaking of those two particular altcoins, Dash has seen its value climb by 13.52% over the past 24 hours. This is despite a trading volume of under US$50m, mind you. Ethereum, on the other hand, notes an 18.02% gain over the past 24 hours, thanks to a trading volume which even surpasses Bitcoin’s. Many people still hope to see ETH return to US$400, but for now, it is a struggle to remain above US$160.

Seeing the Ethereum trading volume surpass Bitcoin’s is not entirely surprising. Korea and China are trying to push the ETH price back up, yet their efforts are not wildly successful so far. In fact, the price on Bithumb – denominated in US Dollars- is below the ETH/BTC price on Poloniex when converting it to USD. That is somewhat surprising, considering Korean exchanges often depict higher values for cryptocurrencies compared to Western markets.

It is still too early to tell if the cryptocurrency markets are effectively recovering. For all we know, this is just a temporary blip on the radar, which will be nullified before the day is over. It seems plausible to assume Bitcoin will have a tough time remaining above US$2,000 for an extended period of time. The markets remain volatile for quite some time to come, but there is always sunshine beyond the dip. No one needs to panic right now, as things will be alright in the end.

David Ogden
Entrepreneur

Author: JP Buntinx

David

3 reasons cryptocurrency prices are in free fall

Whether it be Bitcoin or Ethereum, every cryptocurrency has suffered massive losses over the past several days. Prices have dropped to as low as 64 percent, bringing the entire cryptocurrency market cap down to $70 billion from $110 billion.

Ethereum’s price has gone from $400 right down to $151 in about a month, leading investors to panic sell. On the other hand, Bitcoin, which dominates the cryptocurrency market is down about 36 percent from its high (it’s currently trading around $1,894). Investors are finding it hard to hold onto cryptocurrencies at such a low price — especially amateur investors who bought them at a much higher price.

So what is causing the prices to dip so low? Could they go any lower? Could the market rebound from here?

Here are a few possible causes for the recent price tumble:

1. August 1st is looming

The infamous crypto “civil war” is around the corner. The debate on whether or not to increase the Bitcoin block size has been going on for a few of years now, with disagreement between the miners and nodes.

On August 1st, we could see a split, with part of the Bitcoin network supporting a change in protocol and the other part sticking to the current protocol. The result could be a massive devaluation of Bitcoin. This particular concern is making investors nervous, and some are liquidating their BTC into fiat, which could be the cause for this free fall.

As the Bitcoin price falls further, it will take down most of the major currencies with it. It is safe to say August 1st is not only Bitcoin’s independence day, but also a big day for all the blockchain based currencies.

2. Post-ICO “startups” are cashing out

Many blockchain-based companies have managed to raise millions of dollars in ETH — through initial coin offerings (ICOs) without even having a product. Nearly $700 million was raised in total last month through ICOs on the Ethereum platform.

Needless to say, most of these so-called startups are not worth the money they have raised. For instance, the BAT ICO raised $25 million in less than a minute, Cosmos raised $16 million, Status raised $95 million, and Bancor raised $153 million. One thing these companies are good at is marketing and writing fancy white papers.

Serious startups may hold onto Ethereum when they receive their funds, but those that are looking to make a quick buck could immediately cash out. This trend could also cause honest companies to liquidate their ETH and hold their funds in fiat (because, well, less volatility).

This could be one reason the Ethereum price is feeling downward pressure. EOS, for instance, which raised $200 million worth of ETH earlier this month, has apparently been offloading its ETH to Bitfinex. EOS is not alone; TenX, which listed Vitalik Buterin as an investor, raised 200,000 ETH ($67 million at the time) in its token sale, has sold nearly 30 percent of that ETH cache already. It is not clear whether TenX’s ETH are being sold on open exchanges or directly to individual investors, but they are going off TenX’s smart contract address.

From a startup’s perspective converting ICO funds (ETH) into fiat isn’t a bad thing at all, as Jeremy Epstein explained recently on VentureBeat. It helps them stay away from a highly volatile market and focus on their project.

Still, given that many ICO project developers have no incentive whatsoever to deliver on their promises following a big fundraise, we need an ecosystem to regulate these irrational multimillion-dollar seed funding rounds — and it needs to be set up quickly. The system must ask for provable business models. The projects must have use cases, users, flowing revenue, and even profits. Also, a working prototype would be nice.

3. We’re seeing market manipulation and amateur panicking

The cryptocurrency market is as unregulated as it can get. Things that would result in jail time on the stock market are legal here. In such a scenario, it’s no surprise that big players are manipulating the markets for their own gain. It’s no longer rare for people to run bots to buy and sell cryptocurrencies.

Amateur investors, on the other hand, want to make quick profits. Once the price starts falling, these investors tend to panic sell. The combination of market manipulation and panic selling may be a reason behind the current price fall. One might argue that the market is going through its long term growth correction, but there is a chance it could be in for a deeper fall. The market could swing either way.

The bright side

Cryptocurrency is here to stay. While most of the current coins might disappear in the years to come, a few of these startups hold the potential to disrupt the entire financial system as we know it.

Some analysts are very bullish on this market and say it is still in the nascent stage with very few investors. Once the cryptocurrency market goes mainstream, the market cap will grow and so will the prices of coins.

David Ogden
Entrepreneur

Author: Anupam Varshney

David

Cryptocurrency fall continues ahead of Bitcoin’s ‘civil war’ conclusion on Aug 1- Ether below $200

Cryptocurrency fall continues ahead of Bitcoin's 'civil war' conclusion on Aug 1- Ether below $200

Bitcoin prices fell below USD 2,100 today and are inching towards breaking the USD 2,000 level, as bears continue their rampage on cryptostreet.

Cryptocurrencies continue to bleed as speculators remain jittery ahead of bitcoin’s scaling debate conclusion on August 1. The total market cap has dropped by USD 9 billion, a 11 percent fall, in the past 24 hours, according to coinmarketcap.com.

Bitcoin prices fell below USD 2,100 today and could soon break the USD 2,000 level, as bears continue their rampage on cryptostreet.

The price slipped to USD 2,057, at time of reporting, according to CryptoCompare.com, a drop of around 32 percent from its all time high of USD 3,000.

Ethereum, bitcoin’s closest rival in terms of market cap, again dropped sub-USD 200 to the levels of USD 186, as per CryptoCompare. After falling 50 percent from its all-time high in June, ether has now hit a 45-day low.

Other major cryptocurrencies like litecoin, ripple, zcash have witnessed a drop of 10-20 percent over the past 24 hours.

The crypto-asset space reached a peak market cap of USD 116 billion in June and since then has lost USD 42 billion, a 36 percent correction over the past one month, entering a bear market, going by conventional definition.

Since the start of 2017, cryptocurrency prices have had a phenomenal rally. Experts believe this was due to speculative buying as prices were being driven by the mania for initial coin offerings (ICOs).

What the ‘fork’

Just when everyone thought it was over, the bitcoin ‘civil war’ resurfaced in June when major mining firm Bitmain announced the launch of a user- activated hard fork (UASF).

In May, a majority of blockchain industry bigwigs reached a consensus regarding the bitcoin scaling solution and agreed to enable the Segregated Witness (SegWit).

The SegWit was supposed to be a soft fork, a temporary solution to make bitcoin's software protocol handle the growing transactions burden.

"The prospect of a bitcoin fork isn't enticing for bitcoiners as it highlights the inability for the project to move forward and the divisiveness in opinions on how to do so," Charles Hayter, co-founder and CEO of cryptocurrency data platform CryptoCompare, had earlier told Moneycontrol.

"The scaling debate has been around for two years now and the ramifications of the present state of play lead to a number of price-sensitive scenarios that are not positive."

n case of a hard fork, if the bitcoin blockchain splits, users are at risk of losing their bitcoin. Bitcoin experts have suggested to not make transactions during the uncertain time period around August 1.

If the Bitmain hard fork happens then there would be two legitimate Bitcoin ledgers on August 3rd. The soft forked version of Bitcoin and the newly forked Bitmain Bitcoin.

David Ogden
Entrepreneur

Author: Sidhartha Shukla

David

Cryptocurrency Investors Must ‘Be Prepared to Lose Everything’

Cryptocurrency Investors Must 'Be Prepared to Lose Everything'

Potential investors in cryptocurrencies should focus on finding a great new concept rather than rushing to buy volatile Bitcoins, Dr. Campbell Harvey told Radio Sputnik.

The market in Bitcoin and other cryptocurrencies has been subject to remarkable growth but also volatility in recent months.

On June 11, the price of Bitcoin peaked at $3,019, an increase of more than 300 percent since the beginning of the year. However, the price has dropped since then and the cryptocurrency was trading at $2,207 on Friday.

The value of the Ethereum cryptocurrency has also decreased by almost half in recent weeks from a high of $392 on June 13 to $211 on Friday, according to Coindesk.com.

According to BlackRock's global chief investment strategist, cryptocurrency volatility may be a sign of a bubble in the market.

"I look at the charts, and to me that looks pretty scary," Richard Turnill told a media briefing in New York on Tuesday.

Dr. Campbell Harvey, Professor of Finance at the Fuqua School of Business, Duke University, told Radio Sputnik that the sharp rises in the value of cryptocurrencies this year is a cause for caution.

"Any time you see something go up in value by a factor of 20 over a few months, you need to be very cautious," Harvey said.

"I think part of it is just the nature of the actual game, that this is a new technology, it is extremely volatile. For instance, if you look at Bitcoin it is six times the volatility of the S&P 500. It is very volatile and it's very difficult to figure out what the actual value is. If you are speculating in cryptocurrency, you need to be prepared to lose everything," Harvey said.

"In the 'dotcom bubble,' people were basically buying lottery tickets. They saw firms go from one cent a share to $100 a share, it was like a lottery and you didn't want to be left behind. You wanted to have some kind of investment and that drove up the prices very dramatically and I think it's the same thing today with the cryptocurrencies."

'Digital Gold': Cryptocurrencies Soar as Investors Swap Dollars for Bitcoins

Harvey recommended that potential investors do their research before taking the plunge and focus on finding an attractive concept.

"You really need a good story behind a new crypto that you're offering. There will be a lot of people coming in with bad ideas that will get funding. The best way to do it is to invest directly in some of the start-ups in this space rather than just going out and buying some coins."

"When the prices go up so dramatically, a smart investor will basically take some profit and indeed this is what I recommend to your listeners. If you've doubled your money, sell half. What that means is that you've recovered your initial investment and everything that's left is just pure profit and if you lose it, you lose it.

"Given there's uncertainty in the US right now, people are looking elsewhere. Gold is an alternative but gold is real pain because you have to vault it, basically protect the gold. But cryptocurrency is basically extra-national, you need a wallet and backup. You don't need a vault or security guards."

In the future, cryptocurrencies will develop in several different ways. These include collateralized cryptocurrencies and the expansion of the blockchain technology behind them.

"One of the things we'll see is collateralized cryptocurrencies. There's an initiative with the Chicago mercantile exchange and the royal mint group in which they'll put some gold in a vault and issue a crypto based upon that gold.

"As soon as you do that, then the crypto is linked to the price of gold and its volatility is linked to the price of gold. You can do this with anything – with equity, bonds, commodities in general, that you can issue cryptos based on a vault or a storage facility with the actual collateral. I think we are just beginning to see the collateralized versions."

"In a broader context, most of the action in terms of blockchain is not with cryptocurrencies, it's with businesses using blockchain technology to solve things like supply chain problems and other property transfer problems where you don't even need a cryptocurrency. So, as I see it from a business point of view, most of the action won't come from the initial coin offerings, but the application usually of Ethereum-based blockchain technology in business."

"It's not as sexy as looking at the price of Ethereum or Bitcoin doubling or tripling or going up by a factor of 20. In the media, people focus on the cryptocurrencies but in the practice of business the action is blockchain applications to solve business problems, not as much the currency aspect."

David Ogden
Entrepreneur

David

Ethereum’s share of the cryptocurrency market has exploded

Ethereum's share of the cryptocurrency market has exploded

Ethereum is gobbling up share in the cryptocurrency market.

A new report by Autonomous NEXT, a financial technology analytics service, shows that Ethereum's percentage of the total cryptocurrency market has sharply risen since the beginning of the year.

In January it stood at approximately 5%. As of June 22, its marketcap as a percentage of the entire market rose to 30%.

Ethereum's impressive rise has led to a dramatic fall in bitcoin's marketcap as a percentage of the market. It has declined from about 85% at the beginning of the year to just under 40% as of late June. Up until mid June, Ethereum was on track to surpass bitcoin as the world's largest cryptocurrency by market cap, according to Coindesk, but its share of the market has since pulled back.

Still, the shift from bitcoin to Ethereum reflects a change in what the cryptocurrency industry wants from blockchain tech, according to the report.

"Early phase of cryptocurrency market development focused on who will be the “digital gold” – and Bitcoin won through the largest developer and adoption ecosystem," the report said. "However, current battle is for other functionalities, such as global decentralized computing or smart contracts infrastructure."

Ethereum, unlike bitcoin, wasn't built to simply function as a "digital gold." According to Paul McNeal, a bitcoin evangelist, the Ethereum blockchain was built as a platform on which two parties could enter into a so-called smart contract without a third party. As a result, it can be used as a currency and it can "represent virtual shares, assets, proof of membership, and more."

The multifaceted functionality of Ethereum has many folks in financial services bullish on its future. Mike McGovern, the new head of Investor Services Fintech Offerings at Brown Brothers Harriman & Co, is one such person.

"Ethereum is not only cheaper than bitcoin, it is also more robust and has more applications outside of simply financial transactions," he said in a recent interview with Business Insider.

A survey recently cited by Nathaniel Popper in The New York Times indicates that a lot of businesses are singing a similar tune. Almost 94% of surveyed firms said they feel positive about the state of ether tokens. Only 49% of firms surveyed had a positive feeling about bitcoin.

David Ogden
Entrepreneur

Author: Frank Chaparro

David

Cryptocurrencies Took A Hit, But Some Experts Say Now Is the Best Time to Buy

Cryptocurrencies took a hit Tuesday, with bitcoin and ethereum dropping significantly. However, many experts are advising investors to hold, and some are even advising people to buy now.

BLACK CRYPTO TUESDAY

Tuesday, July 11, was a rough day in the cryptocurrency world, with very few of the Top 100 Coin Market Cap list cryptocurrencies in green. At the time of this writing, bitcoin was still leading the market after plummeting by 8.8 percent on Tuesday; by Wednesday morning it climbed back a little, hovering above $2,300. Ethereum Classic fell by 18.4 percent, opening Wednesday just above $200. All of the other major cryptocurrencies did worse except for Litecoin, which dropped a relatively modest 11.4 percent.

However, it’s important to see this problem in context and remember where we were before this period of explosive growth that began just half a year ago. On January 1, 2017, bitcoin closed at $997.69; on January 3, ethereum closed at $8.35.

So while this is the first time since May that the price of ether has dropped below $200, for example, the values are still significantly higher than they were just months ago, and they have retained most of their 4,500 percent growth from this year.

HANGING IN

Some analysts predicted that July would be a critical month, given the ongoing Bitcoin network scaling issue. However, although this is certainly a time of turbulence in cryptocurrencies, many experts are advising investors to stand fast — and some are even saying that now is the best time to buy.

“This is the time for all those who thought they have missed the boat to get on board.” — Samuel Dwomfour

Initial coin offering (ICO) consultant Murray Barnetson told Coin Telegraph that holding remains the best choice even though things might still get worse, should people start to panic. ICO expert Priyabrata Dash agreed that the scaling issue underlies the overall drop in major cryptocurrencies, but told Coin Telegraph that August may well be positive.

Bitcoin Powpow’s Edward Cunningham also spoke to Coin Telegraph: “We have all known that July was going to be a bumpy month due to the BTC possible split drama which only adds to the ICO’s dumping for liquidity — let’s hope beginning August the trend changes and heads North. In the meantime, hold as best you can.”

Ghana Blockchain Institute president Samuel Dwomfour is among the experts who think now is a good time to buy. “I’m not perturbed at all. This is the time for all those who thought they have missed the boat to get on board,” he told Coin Telegraph.

David Ogden
Entrepreneur

Author: Karla Lant

David

Crypto Calamity: Ethereum, Bitcoin Prices Sink as Market Plunges Below $80 Billion

Litecoin fared better than most cryptocurrencies during today’s market plunge, only losing 3.8 percentage points where most cryptos suffered bigger hits, according to coinmarketcap.com. Among the cryptos with more than a billion in market capitalization, only bitcoin outperformed Litecoin in the most recent 24-hour period, losing only 2.82 points.

Litecoin, the fourth largest crypto with $2.377 billion in market capitalization, traded at $45.77 today. Second place Ethereum, by contrast, lost 10.2 points and continues its downward trend. Ripple, the number three cryptocurrency, lost 14.3 points.

Only 10th ranked BitConnect, with $387.854 in market capitalization, fared better than bitcoin and Litecoin in the 24-hour period, only dropping 0.57 points.

Market Suffers A Big Fallout

On Monday, the total cryptocurrency market cap fell below $90 billion for the first time in July. This market cap evaporation continued on Tuesday, as the total value of all cryptocurrencies plunged as low as $77 billion, a number not seen since late May. At present, the market cap is $84 billion.

Litecoin as been surging since March, when it began climbing from $4.04 to $53.60 July 4. Litecoin crossed the $1 billion mark in market capitalization for the first time ever earlier this month.

Longer term, Litecoin has rode bitcoin and Ethereum’s post-March surge, jumping from $3.85 on March 13 to $53.60 on July 4, at which point it well outdistanced its prior record of $33.72 on Dec. 1, 2013.

The price had fallen as low as $1.33 in January of 2015 before climbing to $7.76 in July of that year before tumbling steadily until June 26, 2016, when it reached $4.00.

Litecoin’s Long-Term Surge

Litecoin received a boost last month when BitGo, the leading multi-signature technology-based service provider that works with some of the largest bitcoin exchanges and trading platforms, began to support Litecoin and provide security services for the Litecoin platforms.

The BitGo boost came on the heels of Charlie Lee, the creator of Litecoin, announcing his plans to resign from his role as Coinbase director of engineering to solely focus on the development and innovation of Litecoin. Lee noted that the decision of the BitGo development team to implement Litecoin and provide multi-signature security services for Litecoin-based platforms and service providers is a major step for the Litecoin community and industry.

David Ogden
Entrepreneur

Author: Lester Coleman

David

Is Solar-Powered Cryptocurrency Mining the Next Big Thing

Cryptocurrency mining is a difficult and costly activity. Miners must pay to build rigs capable of vast amounts of processing power, and then the rigs themselves must be powered with large quantities of electricity. It's all a careful balance between how much the operation costs and how much profit it is able to generate. (See also: What Happens to Bitcoin After All 21 Million are Mined?)

With mining operations for Ethereum, one of the leading digital currencies on the market today, taking up the same share of electricity as that of a small country, miners have to be careful that they aren't spending more than they are making. Because of that, some mining operations have begun to look to solar-powered rigs, set up in the desert, in order to reduce mining costs and make the largest profit possible. (See also: Chinese Investment in Bitcoin Mining is Enormous.)

Solar Panels Provide Inexpensive Power

Mining operations with the tools and resources to be able to set up solar-powered rigs in the desert are finding that it is a good investment. Once you have paid for the solar panel system itself, the cost of mining is virtually free. Getting rid of a hefty electric bill which typically weighs down mining operations leaves more room for profit.

The Merkle recently documented a mining operation focused on Bitcoin in this manner. The setup has been running successfully for almost a year and currently uses 25 separate computing rigs. The process has been so profitable, in fact, that the miner running the operation plans to increase the number of computers to 1,000 this fall.

In the case of this particular desert miner, the individual mining rigs cost about $8,000. This cost has included all solar panels, power controls, batteries, and the Antminer S9 ASIC processor. When fully operational, each miner brings in a profit of about $18 per day.

Balance Between Mining Costs and Crypto Prices

Of course, a cheap mining operation is only part of the equation. In order for miners to make a tidy profit, the price of the cryptocurrencies they are generating must remain high.

In the case of the mining operation in question, Merkle suggests that Bitcoin prices must stay above $2,000 in order for the operation to be profitable. Considering that the price of most cryptocurrencies is highly volatile, and that drops of 205 or more have occurred in many individual days, this keeps a certain element of risk present in any mining operation.

It seems likely that more and more miners will turn to areas in which renewable energy is easily accessed. Iceland has already become a popular destination for Bitcoin miners thanks to its fast, virtually limitless internet. Miners looking to move to the desert should be cautious for other reasons, though: mining in the heat can cause rigs to break down more easily.

David Ogden
Entrepreneur

Author: Nathan Reiff

David

Bitcoin is Permanently Superior to Paper Money in Ways – German Business Magazine

Bitcoin is Permanently Superior to Paper Money in Ways - German Business Magazine

Bitcoin is Permanently Superior to Paper Money in Ways – German Business Magazine

While many mainstream media personalities and analysts remain skeptical about bitcoin (and often rehash misinformation), others are beginning to give cryptocurrency an honest appraisal.

The latest comes from leading German business magazine Wirtschafts Woche, which recently published an article praising bitcoin. “The Revolution of Cryptocurrency,” written by economist Thorsten Polleit, argues that the advent of cryptocurrency set off a monetary revolution that could eventually supplant fiat national currencies.

Public fiat money, he explains, possesses four inherent flaws:

1. Inflation

2. Monetary distribution inequality

3. The tendency to produce boom-bust cycles

4.The temptation to increase national debt

Polleit states that cryptocurrencies avoid these and other flaws due to market competition. As long as no currency has a state-mandated economic monopoly, consumer demand should favor better coins.

However, it should be noted that not all cryptocurrencies resist the flaws Polleit finds in fiat money. Many cryptocurrencies are inflationary, although their rate of inflation is generally fixed rather than variable. Cryptocurrency distribution models can also exhibit inequality, and there is much debate about what constitutes a fair coin/token dissemination method. That said, by divorcing monetary policy from the national government, one will avoid the final two flaws of public money.

Polleit believes consumer demand for bitcoin will likely increase as fiat money loses purchasing power and national governments reduce or even eliminate cash transactions. He foresees the potential for blockchain-based currencies to “make…Fiat money worthless.”

Despite this bullish tone, Polleit urges investors to approach cryptocurrency speculation with caution. As he states (translated into English):

While many mainstream media personalities and analysts remain skeptical about bitcoin (and often rehash misinformation), others are beginning to give cryptocurrency an honest appraisal.

Whoever obtains [cryptocurrency] should know that he does not invest, but speculates. Unlike in the case of shares or bonds, they do not have a recognized and tested valuation formula – the same also applies to raw materials or art objects. You can not even estimate whether the price you pay is justified with regard to the “intrinsic value” of the [coins].

For this reason, he seems to favor colored coins tied to physical assets, such as gold.

Diverging from other pro-bitcoin analysts, Polleit encourages investors to avoid currency speculation. The sensible investor, he says, should instead continue to invest in “great companies” and take a long-term approach to the markets. The monetary revolution may cause economic upheaval, but he explains that solid companies will continue to bring positive returns no matter what currency–or cryptocurrency–they use to transact business.

David Ogden
Entrepreneur

Author: Josiah Wilmoth

David

$100 Billion Cryptocurrency Market Showing Signs of Maturity as Mainstream Investment Appeal Grows

Cryptocurrency has burst onto the financial scene like a blazing comet, offering investors a new asset class to grow their wealth, hedge against instability and escape the grips of central banking. As the market for digital coins crossed the $100 billion mark, hedge funds and major institutions suddenly found themselves scrambling to make sense of the shadowy world of cryptocurrency.

For the most part, investors no longer question the viability of cryptocurrency, but are instead exploring what shape this evolving market will take.

Cryptocurrencies Come Into Their Own

Though highly volatile, cryptocurrencies have been on a dramatic upward trajectory for the past year. In the case of bitcoin – the pre-eminent digital coin founded in 2008 by a person or entity called Satoshi Nahamoto – the bull market is at least seven years old. The success of bitcoin has spurred a bevy of other so-called altcoins, many of which have latched on to the success of the flagship digital coin.

Bitcoin’s share of the global cryptocurrency market has quickly diminished as alternative payment systems hit the market. At the time of writing, bitcoin represented roughly 41% of cryptocurrency market capitalization. By May, digital currency alternative Ethereum had surpassed half of bitcoin’s market value.

Several other currencies have also crossed the $1 billion mark this year, including Ripple, Litecoin, Ethereum Classic, Dash, NEM, IOTA and Stratis. Many more are worth hundreds of millions of dollars.

Key Investment Drivers

The growth and widespread adoption of cryptocurrency-as-an-asset has dividend analysts and investors seeking to understand the nature of the bull market. The market’s dramatic rise through the first six months of the year has raised fears of an asset bubble with dangerous consequences. But proponents of digital currency say the market has plenty of room for growth as investors seek alternative asset classes. They cite several key investment drivers as proof that cryptocurrencies aren’t overbought, but are instead maturing.

1. Hedge against instability: Despite their volatility, cryptocurrencies are seen as a hedge against central bank intervention and other forms of fiat-currency related instability. China is the most prominent example, as mainland investors have poured into bitcoin to diversify away from yuan devaluation. This compelled the People’s Bank of China (PBOC) to initiate a four-month freeze on bitcoin withdrawals.

2. Increased regulatory certainty: Earlier this year, the Japanese government legalized bitcoin as a form of payment and initiated capital requirements, cyber security laws and annual audits. Japan’s Accounting Standards Board is also in the process of developing a standard government digital currencies.

3. Store of value: Digital payment systems like bitcoin are mined, which makes them scarce digital resources that offer many of the same investment benefits as commodities. Bitcoin has a fixed issuance schedule with a finite supply of 21 million coins.

4. Greater investment appeal: Bitcoin’s success has triggered a fresh wave of buying interest from various segments of the market. Institutional investors and banks have expressed a greater interest in buying bitcoin. Nine of the world’s biggest banks – including Goldman Sachs, JPMorgan and Credit Suisse – are developing a common standard for blockchain that could also hasten the appeal of cryptocurrency-as-an-asset.

5. Decentralized payment system: Today, more than 100,000 merchants accept bitcoin as a form of payment. As the evolution away from fiat currency continues, demand for distributed digital money that exists beyond the purview of central banks will likely grow.

Price Volatility Continues

Despite their widespread appeal and unrelenting gains, cryptocurrencies are prone to dramatic price swings. This trend is expected to continue as the market slowly matures.

Cryptocurrencies sold off again on Friday, with five of the world’s top-ten coins posting weekly losses of 9% or more. Ethereum suffered the largest setback, while bitcoin managed to pare losses. IOTA, BitShares, NEM and IOTA also faced heavy losses.

With more than 700 digital payment systems on the market, analysts caution that not every cryptocurrency offers investment value. Some are clearly riding the coattails of bitcoin, while others are benefiting from speculation.

At the same time, there’s still plenty of room for disruption as alternatives to bitcoin vie for capital. Analysts observe that the the cryptocurrency market will likely see significant diversity for the foreseeable future.

David Ogden
Entrepreneur

Author: Sam Bourgi

David