Since it was created nearly a decade ago, Bitcoin and the cryptocurrency market it spawned have faced a constant stream of doomsayers declaring the coin dead or headed for obsolescence. Ten years later, a single Bitcoin is worth four figures, and it appears to have found some stability in tandem with its growing maturity. The same can’t be said for the sector which now includes thousands of coins and tokens, each of which exhibits varying degrees of success.
Moreover, for all their promise, cryptocurrencies still can't seem to break into the mainstream. There are still very few merchants that accept crypto payments, and most financial services continue to be settled in fiat currencies. Critics say crypto may have been a flash in the pan. For supporters, though, the signs are clear that even with the current culling of the crypto ranks, the sector will emerge stronger.
The real question is, which group is right?
- Cryptocurrencies have become fairly popular in the market since they were first introduced in the early 2000s.
- Bitcoin reached historic highs, nearing $20,000 valuation in December 2017 before crashing the following month.
- Cryptocurrency critics say the market is doomed mainly because of a lack of acceptance, the denial of applications for crypto-ETFs, and the future of regulation in the market.
- Proponents contend that these currencies are gaining more momentum in the mainstream market, and are moving toward becoming a standard for payments and value exchanges in different industries.
What the Skeptics Say
The number of cryptocurrencies on the market lies somewhere above 2,000. This should be a clear signal that the sector is booming. But the numbers are deceptive. According to a CNBC report, more than 800 of those are essentially dead—that is, they're worth less than a penny. Of those that remain, only a small number are relevant. Not to mention reports of rampant scams and fraud in the initial coin offering (ICO) market, and other signs of trouble for the sector.
The trouble starts with Bitcoin itself, as the cryptocurrency faced substantial difficulty in 2018. After reaching stratospheric heights with a near-$20,000 valuation in December 2017, Bitcoin prices came crashing down in January, and have struggled to reach its previous highs. Additionally, the value of crypto transactions carried out, which was astronomical in the first quarter of 2018, collapsed by nearly 75% during the second quarter.
Bitcoin transactions have steadily risen since they crashed, reaching 365,972 as of April 15, 2019.
The lack of acceptance, especially in the investment arena can partially be attributed to the U.S. SEC’s denial of more than a dozen applications to list Bitcoin exchange-traded funds (ETFs). More importantly, the leeway and freedom cryptocurrencies enjoyed as unregulated commodities is rapidly coming to an end. There's been a drastic upswing in regulatory efforts, with countries across the globe taking a more serious and deliberate stance. This, many skeptics say, could be yet another nail in the coffin, stifling growth and limiting the sector’s true potential as a disintermediating force.
Argument for Cryptocurrencies
While it is true that Bitcoin prices—and by extension most other cryptocurrencies’—crashed in early 2018, the volatility that once defined the market appears to be gradually fading. While this is bad news for speculators, it is excellent news for institutional investors—who many believe are the key to unlocking crypto’s future.
Cryptocurrencies, and blockchain in general, are starting to garner more mainstream adoption. While merchants remain wary of digital currencies, banks, major tech firms, and other corporations have already started employing them.
“Cryptocurrency is nowhere near dead," according to Ceek VR CEO and founder Mary Spio. "It’s just scratching the tip of the iceberg toward mainstream adoption, when companies offer purposeful real life value and integration of cryptocurrencies, we will begin to see the next wave and resurgence of cryptocurrency. It’s all about creating more natural demand and less speculation and hype.” Indeed, it seems many of the cryptocurrencies that have faded were those based on hype and little else.
Satoshi Nakamoto is the name used by the unknown creator of Bitcoin.
“Even though 2018 has seen a downturn in the market following the bull run in 2017, we are convinced that the future holds a rebound, driven by institutional capital flowing into crypto assets. Within crypto assets, the wealth distribution will shift away from utility tokens towards Bitcoin and likely security tokens,” said Agada Nameri from iCapital, an iAngels subsidiary dedicated to blockchain opportunities.
While many have shot down the idea that bitcoin and the crypto market are mainstream, the sector is determined to prove them wrong. While cryptocurrencies may still not be a standard for payments and value exchanges, the technology that underlies them—blockchain—is quickly becoming a standard in different sectors and industries. Perhaps more crucially, the services these tools provide are all based on, and powered by, cryptocurrencies and tokens. As companies continue to fix pain points and uncover new frictionless solutions to old problems with blockchain, crypto will flex its muscles even further.
The Bottom Line
Despite its many doubters and doomsayers, the crypto market has continued to plug along and thrive. Although prices have fluctuated wildly—and in some cases enormously to the downside—the sector is finally starting to stabilize and increasingly appears to be leaving its infancy behind.
As more companies discover uses for crypto and blockchain, and more users accept them as a way to simplify their lives, they will remain a central point of conversation in technology. More interestingly, as it better demonstrates its value in a variety of situations—from banking to buying coffee—the technology will further ingrain itself. Coins may come and go, and many cryptocurrencies are indeed likely to fail, but the sector will continue to forge ahead unabated.