Hey everyone, it’s Whatever Wednesdays again. Some news has happened in the crypto space that I wanted to share with you guys — as well as discussion and my humble predictions. So let’s talk about “Cryptocurrency Survives?”
Stock Photo from: Pixabay
Cryptocurrency Survives?
If you’ve been following the crypto space then you know that two major things have happened:
- A significant correction of Bitcoin (which some are calling a crash)
- Potential government regulation
Here is my opinion on things:
I actually wrote an answer about the first question on Quora which received almost 100k views. Unfortunately, it was deleted for some reason which I don’t fully understand. I felt that answer was reasonably well written, but perhaps they didn’t like the use of my links to my blog or Binance or something, I’m not sure. I’ll paste it here for posterity:
Is it the end of the cryptocurrency market or just another dip buying opportunity?
[Begin answer]
Thanks for the A2A.
The end?
Nah, in my opinion, this isn’t even “the crash” — it’s just another string of “dips” in the wild, wild west that is crypto.
Could I be wrong?
Sure, I’m wrong all the time.
However, I believe cryptocurrency will have future value.
The question is, which cryptocurrencies will have future value? Those are the ones that will survive what I think a “real crash” will be. In my opinion, a real crash will be when we see Bitcoin drop to sub $5000. This will bring down the entire market with it. The ones that emerge from this crash will be the ones with true value and real world use cases, not just speculation.
The question is when will this “real crash” happen?
Of course, I don’t know, but I personally think we’re going to see another strong run up with Bitcoin going up to past $30k before we actually see the real crash.
Everyone loves this “Bubble Picture”, so I’ll show you where I think we are:
[Bitcoin graphic added by me]
Sensei’s Note: This picture was originally from 12-15-17, but I still believe it holds true today.
I think we’re still at very early Enthusiasm. Once you start hearing your Starbucks barista or supermarket cashier ask you how your obscure altcoin is doing… then we’ll be in late Enthusiasm stage.
Remember that Amazon was $18 at IPO in 1997, rising to more than $100, but dropped to less than $10 after the bubble burst. – from Investopedia
I think something similar will happen this time around as well. The problem is no one knows when this will happen… or maybe I’m completely wrong at we’re already at Delusion already or something — although I kind of doubt it.
TL;DR
Just a normal couple of dips in the wild, wild west of crypto.
However, I do think a real crash WILL come — but who knows when.
That’s the end of the answer.
I guess they didn’t like it because it was too short or something, I don’t really know. Anyways.
Before my answer was taken down, there was some confusion about the graph. I think people wanted to zoom out on the graph of Bitcoin and try to fit it the Bubble Graph. That’s not what I was trying to do. My current estimate is that this time period of $20k Bitcoin to $7k Bitcoin and now with some recovery toward $9k isn’t even a blip on the graph above. That volatile time period of $20k, $7k, and $9k fits in a very small window in the grand scheme of things. It probably only covers the tail end of media attention into early enthusiasm.
We must remember that before Bitcoin his $20k in mid December 2017, that just a month before in mid November it was sitting at $8k. If we take the period of November 2017 to February 2018 then Bitcoin is still net positive, and continues an uptrend on the Bubble chart.
Was this is a massive correction?
Absolutely.
Was this “the crash”?
In my opinion, no.
Wait, we aren’t even past new paradigm yet?
Some may argue that we’ve already gone past “new paradigm” when Bitcoin was at its height at $20k.
If that’s true, then this is the “bull trap” with a return to normal before a real crash, down to probably a $1k Bitcoin.
However, I would argue that in order for something to be at “new paradigm” it basically must be as mainstream. While cryptocurrency is talked about and known about, it’s not what I would consider main stream. While people are talking about it, not many people actually own any cryptocurrency.
Like I said in my answer above, once your Starbucks barista and supermarket cashier start talking to you about their obscure altcoins, then we’ve hit mainstream. However, I don’t think we’re there yet. Amongst my friends, I’m the only one even talking about cryptocurrency. One of my friends, who I consider pretty aggressive (the one that likes Ali Baba), even he is taking a hands off approach to crypto. I think this “wait and see” mentality will be common for the next few months, or potentially for the next year.
This caution may be because this generation still remembers both the dot com bubble AND the housing bubble.
Wait what about the SEC and CFTC hearing?
I’ll be honest. I didn’t watch the whole thing. Listening to politicians talk tends to give me a headache, this particular hearing even more so because of the significant lack of knowledge demonstrated. That said, I applaud J. Christopher Giancarlo, the head of the Commodity Futures Trading Commission (CFTC). He seems to understand that cryptocurrency is a world-changing event that we are lucky to be a part of. Rather than regulating it to death, they should try to help it along, and nourish its growth. More so than that, even though he understands it way better than the rest of those in that room, he still acknowledges that there is more to learn and more that must be learned. The overall tone of the event is “cautious optimism”.
For those who want to read more about this, I’d recommend reading these articles:
- Senate cryptocurrency hearing strikes a cautiously optimistic tone – Techcrunch
- SEC and CFTC Hearing: More Legitimate ICOs or “If There Was No Bitcoin, There Would Be No Blockchain” – Cointelegraph
- Bitcoin Traders Are Relieved at CFTC and SEC Cryptocurrency Senate Hearing Testimony – Fortune
I think this is overall good news. Crypto is the wild, wild west. There are a lot of “little guys” getting burned with ICO scams and other scams like Bitconnect. However, I think once we start seeing some institutional investors jump into the fray, then people (retail investors) will follow.
Wait, what is your prediction?
Crypto isn’t going anywhere. The technology is simply too good to die off. However, how many cryptocurrencies will survive is another question entirely.
You can see my Quora answer here where I talk about it:
What 3 cryptocurrencies are positioned to gain the most value over the next 3 years?
People will disagree with me I’m sure, but I just don’t believe in Bitcoin long term. I do understand that they are trying to make some changes with the advent of SegWit and Lightning Network and other stuff. However, I worry about the social consensus necessary to bring about these changes. I think that Bitcoin will see some more hard forks in its future. Overall, I am not very optimistic with its potential to keep up with the other cryptocurrencies. Bitcoin needs a real use case — which it doesn’t currently have.
Don’t get me wrong, I think Bitcoin will rebound from its current low and soar to new heights. However, I think that at some point its true value will be unveiled and it won’t be nearly as high as many think it will be. For many, the only way to get into the crypto market is to buy Bitcoin first and if you want to exchange from one coin to another, you usually have to go through either Bitcoin or Ethereum. In that sense, Bitcoin is a staple in the exchange economy.
But what if you didn’t need to use Bitcoin for exchanges? What if you could just take your $USD and change it directly into whichever coin you wanted without the “middle man” of Bitcoin? Is Bitcoin’s only real world use case the “middle man” of crypto exchanges? If that is so, then once that use case is gone, its value decreases significantly.
What about Bitcoin being digital gold?
Bitcoin can still be digital gold, or a “store of value”. However, if that is all it is, then I don’t think you can justify a price in the $20000 range, or even the $10000 range. Additionally, if all it is digital gold, then it can’t seen the volatility of 30%-60% swings in value like we’ve been seeing.
So who will dethrone Bitcoin?
This is a tough question. However, in the short term I think it will be Ethereum if some things happen:
- Bitcoin can’t get social consensus for Lightning Network.
- We see more fiat pairs, not just to BTC or ETH.
- Ethereum can deliver Raiden, Casper, and Plasma.
- Ethereum delivers the above before its other competitors.
That said, it may be a short term dethroning. Bitcoin may step up to retake the throne from Ethereum if it can deliver on being more than just a “store of value”.
It’s going to be an interesting 2018 — while we continue the Search for Amazon.
TL;DR
SEC/CFTC “cautiously optimistic” about cryptocurrency.
Crypto is so interesting, it’s going to be wild year.
I think we will eventually see a “real crash”, but who knows when.
I also think Ethereum will eventually dethrone Bitcoin — at least temporarily.
Transparency:
As I’ve stated before I own a tiny amount of Ripple (XRP), Cardano (ADA), Steem (STEEM), and Funfair (FUN).
Here is my Binance referral link. If you sign up with it, I get a small commission.
Disclaimer:
I am not a financial advisor and this is not financial advice. These are simply my opinions with regards to cryptocurrency. Please do your own research.
Cryptocurrency is extremely volatile. Only invest what you can afford to lose.
-Sensei
Agree? Disagree? Questions, Comments and Suggestions are welcome.
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So interesting!