The first days of 2018 were definitely not a smooth ride for the Cryptocurrency market. In just a few days over 300 billion dollars was wiped out from total market capitalization of Cryptocurrencies. Many experts and media outlets were talking about the “Crypto bubble” and it’s bursting. Even though the prices of cryptocurrencies are rallying slowly, the sudden plunge begs the question – is there a Bubble?
Well, that was rough. Bitcoin and every other cryptocurrency had a tremendously difficult week. Bitcoin went from over 19 000 to just under 6 000 in just a few days. And the same happened to other cryptocurrencies. Media, as usual, went wild and wrote about `bloodbath’, `massive selloff’ and of course – `bubble bursting’. The experts were talking about Bitcoin falling even further, maybe to 0. There were a lot of `I told you so’ comments coming from the cryptocurrency skeptics.
The problem with the Media and the so-called experts is that they do not see the big picture. They see a sudden slump in the prices and start to panic. They do not understand a thing about Bitcoin. This is the reason why they are almost always wrong. Just a day after their apocalyptic prophecies Bitcoin is rebounding, it is now over 8000. Almost every other cryptocurrency is following Bitcoin’s lead. So, what experts were calling the end of Bitcoin was actually an excellent opportunity to buy them.
The major problem with the old guard of the financial system is that they fear the change. They do not understand Bitcoin and that is why they fear it. This is not a new phenomenon, everything new and big is usually met with misunderstandings, skepticism, and fear. Even giants like Warren Buffet made similar mistakes. Buffet actually advised against buying Google shares, as well as, Amazon shares. He later admitted that this was probably one of his biggest mistakes. The problem was that he did not understand the significance of these companies and the change their products would bring to the market, therefore, he made a wrong judgment.
Apart from failing to understand Bitcoin the experts and the Media also fail to see the big picture. Sure there was a huge downfall in prices these few days, but just a year ago total market capitalization of cryptocurrencies was 18 billion dollars. Now, even after the slump, it’s 381 billion. So, according to the experts, the market which managed to expand by 2 133 % is going to fail because of a few bad trading days.
The point is that the best way to stay informed about the Bitcoin and other cryptocurrencies is to understand it. You have to see a great significance and change cryptocurrencies can bring to the financial world. It is immensely disruptive technology which is bound to change the world. It strives towards the future where financial operations are available to anyone and not just the lucky few who were fortunate enough to be born in a stable country.
Cryptocurrency market is volatile for now because it’s very new. But volatility is not something to be afraid of, it is actually an opportunity to get into the cryptocurrency market. A lot of people made a lot of fortune in the last few days when they saw an opportunity to buy coins while everyone else was panicking.
Long story short, the key is not to give into fear when dealing with cryptocurrencies. Fear only leads to one thing – the dark side.
There is little doubt that 2018 will be the year of cryptocurrencies. The hype around them is still on the rise and it’s not just bitcoin this time – Ripple made headlines after it threatened the dominance of Bitcoin on the market. Long story short, there is a lot of attention around the surge of popularity of cryptocurrencies.
A lot of you probably noticed that there is a very interesting debate about how to scale Bitcoin. The scaling problem is not exclusive to Bitcoin. It was also a major subject with regards to the internet. This blog will try to discuss this problem not from a technical perspective but from a broader perspective.
When one talks about Bitcoin the word Innovation is not far behind. Indeed it might be the most important innovation of the XXI century. However, like most innovations, it’s often met with skepticism.
Currency as a Language
This blog will have a bit more philosophical approach on the future of cryptocurrencies. A lot of people are wondering if Etherium or any other altcoin is going to threaten Bitcoin. Or maybe, amount of altcoins have distributed the value of the network too broadly. These are the questions people tend to have when they are trying to figure out the Altcoins.
Peer to Peer Money
If you’ve read about Bitcoin you will have heard that it is a peer-to-peer money. But what does it mean exactly? To understand that we’ll need a very short and to the point history lesson about money.
How old is money?
We actually don’t really know exactly how old is money. However, we do know that it is at least as old as civilization. There hasn’t been a civilization discovered which didn’t have money. We also know that money is as old, or even older than writing. The most ancient pieces of writing discovered by archeologists are texts about money – ledgers.
Money, in essence, is a form of communication – a way to communicate value. Money by itself is not valuable, it represents an abstraction of money. We use it to communicate value to each other, to express how much we value a certain product or service. Continue reading Peer to Peer Money
What is Bitcoin?
Bitcoin is digital money, however, it’s also much more than that. Just like the internet – it isn’t all about the emails, videos and text messages – these are just its applications. Bitcoin, just like the internet, it has limitless potential and money is just its first application. It is a technology – a currency which is completely decentralized does not rely on banks and on governments.
Anyone can send a Bitcoin from any point in the world to any other point of the world instantly, securely and for minimal fees. Banks, governments or any other third parties are completely unneeded in this process. Therefore, it is a major disruption for present-day international payment systems.
China made news this year when its government cracked down on the cryptocurrency market in September. China made ICOs illegal and later, banned all the exchange companies that operated within the mainland China. While this move was not a big surprise to those who worked in the field, the ban initially hit the price of Bitcoin very hard – price fell by almost $1000.
The ban by China was not a simple case of a suspicious country banning a new service. Approximately 60-70 percent of new bitcoins were mined in China, The world’s oldest Bitcoin exchange was situated in China and the most ICOs were popping up in China. Continue reading What is China up to?
We can safely say that 2017 is going well for cryptocurrencies. Sure, there were some hiccups, but overall this year is proving to be huge for Bitcoin. On January 1st price of a single Bitcoin was $997.69, at the moment of writing this blog, one Bitcoin is worth over $6000. So in less than a year, the price of Bitcoin increased by over 570%. That kind of surge does not go unnoticed – all news outlets start to write about Bitcoin and other cryptocurrencies. Suddenly a lot of people were aware of cryptocurrencies, the blockchain, mining and etc.
The most important news concerning Bitcoin was the split of the cryptocurrency into two different currencies. Like most cryptocurrencies, Bitcoin does not have a central bank which verifies all the transactions, instead, it has blockchain. Until August 1st of 2017, there was only one blockchain for Bitcoin. The whole point of Bitcoin was to make transactions decentralized and outside of government regulations and blockchain system provided that. However, blockchain is not without its faults.
The blockchain can be slow and expensive. Bitcoin network can process up to six transactions per second, while the VISA network can process over 1600 transactions per second. This is one of the reasons why Bitcoin is not yet really feasible for everyday transactions. The only way the general public will adapt to the decentralized network is if it was as fast and convenient as existing payment networks.
Until 1st of August, a single block in a blockchain could contain 1mb of data. This low limit is the main reasons behind delays in the amount of time it takes a transaction to be verified. Naturally, there were suggestions about how to overcome this problem.
The core developers team who are running Bitcoin (maintaining the open sourced code that runs on mining hardware) believe in one solution, while the big mining pools believe in another. Miners suggested that the size of the block in blockchain should be increased, but supporters of BTC (original bitcoin) claim that allowing larger blocks hinders smaller players from mining bitcoins, centralizing power in the hands of large mining entities. Centralization is not a light accusation in the cryptocurrency society. The whole point of creating Bitcoin was to rid ourselves of central regulators.
There was no compromise between the two groups, so Bitcoin split into two cryptocurrencies – BTC and BCH. BTC is the original bitcoin and BCH is the new Bitcoin Cash. The process of splitting is called “forking”. You might have heard this term as it was widely used by the news outlets.
Several months have passed and both currencies coexist, however, BTC is worth over $5000 and BCH is worth just under $400. Bitcoin Cash plunged after the split but rallied soon after. At one point BCH was worth over $800.
BTC proved resilient to the split – it had almost no effect on its price and several days later the price of BTC almost doubled.
The original Bitcoin (BTC) was more affected by the ban on ICOs and exchanges (places where people can exchange coins for traditional currencies) in China. Cryptocurrency was created as a decentralized currency, based on anonymity and deregulation. Decentralization, anonymity and deregulation do not go well with the Chinese government, which have harsh regulations of capital control. After this move, the price of BTC fell to just over $3000, but it recovered soon enough. Even though a lot of miners and exchanges were based in China, it didn’t have a lasting effect on the cryptocurrency.
It seems one split was not enough for bitcoin in 2017. Just a few days ago on 24th of October, Bitcoin split again. Now we have the original BTC, BCH and the brand new BTG, or Bitcoin Gold.
Jack Liao, the CEO of LightningASIC, which sells mining equipment, came up with bitcoin gold as a way to allow people with less powerful machines to join in the mining process, thus decentralizing the network further and opening it up to a wider user base.
It’s still early days for Bitcoin Gold, however, the price of BTG plunged over 66 percent since it started trading.
It’s becoming clear now that we might be looking at another fork in November, which is being advocated by Jeff Garzik. He is co-founder and CEO of Bloq and was a contributor to Bitcoin Core. According to Coindesk, Garzik expects that the planned fork, aimed at compelling the network to embrace a 2MB transaction block size, will take place sometime in the middle of November. So by the end of the year, we are expected to have 4 Bitcoins – the original and three fork versions.
Forks do underline peculiarity of cryptocurrencies. A thing like a fork could never happen to a regular currency because there would never be a discussion on a future course of the currency. The decision would be made only by the central bank. In case of Bitcoin, the decision was made by the players on the free market.
It’s very hard to say whether forks are a good or bad thing, too early for a verdict. However, for the time being, they are here to stay.
Despite all the forks, 2017 will probably be remembered as a year which made cryptocurrencies mainstream. Until 2017 you would meet a small report or a news piece about them on major agencies, but now, the likes of BBC, CNN, Reuters, and Bloomberg are actively reporting on cryptocurrencies. This, in turn, makes more people interested in the industry, making it bigger and better.
Experience has shown that predicting the future developments in the world of cryptocurrencies is not an easy job. This is mostly due to nature of cryptocurrencies. They have no central authority and are managed by the free market, which is unpredictable, to say the least. However, there are some predictions about which many experts agree. The most important one is that Bitcoin and its newer rival Ethereum are here to stay. Not even China going against them had any lasting effect and their price hit a record high after the ICO ban.
Many more altcoins are bound to show up and many of them will be successful ventures. In fact, some experts predict, that ICOs might make more money than silicon valley.
While most experts don’t like predicting the price of cryptocurrencies, most of them agree that prices not going down anytime soon. Tom Lee, a managing partner at Fundstrat, (aka Wall Street “bear”) predicts that by 2022 Bitcoin will be worth $25 000. He thinks that the increasing trend to view bitcoin as a store of value and a hedge against inflation will drive the surging price. Also, it might capture some of gold’s market share. He also emphasized that younger investors–particularly those under age 30–believe that bitcoin makes “perfect sense” as an investment.
$25000 for a coin might seem far-fetched now, but remember, just 10 months ago, the price of a single Bitcoin was under $1000. Now it just hit a record high $7140.