With unpredictability as the only constant in the crypto world, the average investor is often left intrigued by its efficacy. As new cryptocurrencies are coming up every day, it is becoming increasingly difficult to track trends in the crypto market. Having a strong support from banking partners(Standard Chartered, Sumishin Bank) Ripple is rapidly carving a niche for itself. While Ethereum’s blockchain has varied applications, new coins like Zilliqa claim of 2488 tps.
An alarming interest and knowledge in the investors has lead to a diverse pool of people coming together to pool in the crypto market. However, the market is still dominated by Bitcoin with 48.5% dominance, circulating a supply of 17,186,987 BTC (only 21 Million BTC can be mined till 2140) and the market capitalization of $273,143,147,287 as compared to Ethereum with a market cap of $41,031,056,610 and circulating supply of 101,089,275 ETH (1BTC=18.20 ETH) is very likely that the industry would be raking trillions soon.
As reported by cnbc.com, Stock market expert and Birinyi Associates founder Laszlo Birinyi called bitcoin a catalyst for much interest. “It’s also giving the guy on the trading desk, sitting at a hedge fund, a shot in the arm. All of a sudden more and more people are aware there’s a market going on, the stock market and there’s a way to make money.”
With Bitcoin’s massive precedence over altcoins, a crash would invariably lead to altcoins plummeting and investors losing faith in the cryptomarket. Ideally Bitcoin crash should not impact the market, but most crashes are psychological rather than technical. Whereas a retail investor may sell their assets at significantly low prices, a seasoned investor might purchase more assets and sell it when the market rises again.
In the coming future, the lightning network will further enhance Bitcoin’s Blockchain which will multiply its use-cases manifold. Inevitably when the Bitcoin crashes, the altcoins follow a similar pattern. As ICOs came up and a broader market of altcoins began to flourish, BTC became the reserve asset for that larger economy. This grew to become a significant feature of Bitcoin, especially in the bull markets of 2014 and 2017
Alexander Leigel’s tweetstorm reinstated his unwavering faith in Bitcoin; he said “As long as Bitcoin is kept in first place, the system will prosper. If the market ever forks away from Bitcoin by installing a successor (and another, and another), it will experience massive value destruction.”He further added “There is an unspoken bond that keeps Bitcoin on the throne. A game-theoretic incentive that prevents any other coin from ever successfully displacing it.”
Yet, it is not a false supposition that Bitcoin is in a bubble. Bubbles are recurring phenomena in markets and will continue in the future. With the quick rise in the price of Bitcoin, the investor is wary of further price rise and ends up investing. The increased investments subsequently lead to more increased prices and more investments lead to an exponential rise in prices. The vicious cycle proliferates until investors recognize it and they gradually start withdrawing their money. The bubble forms quickly and bursts at an equally high speed.
Nobel-Prize winning economist Robert J Shiller called bitcoin “the best example” of a speculative bubble. He said this early this year when the bitcoin price was around $5,000. He also said, “The Bitcoin price is like a thermometer measuring the intensity of the epidemic.”
A mere $100 investment in Bitcoin in 2010 would have raked millions in 2018. Recently, Bitcoin rose above $8300 regaining its claim as the king of the cryptoverse. The overpriced Bitcoin could have a rise in its utilization with Crypto Debit Cards. This will facilitate crypto payments converting cryptos into fiat currency automatically. The sudden price rise can be thus be easily justified. However, the crypto cards are yet to be familiar enough to increase usage drastically.
However, the possibility of a paradigm shift towards Ethereum can’t be completely ruled out. Undoubtedly investors have reaped rich benefits from Bitcoin, Ethereum has all the potential to enthrall investors. It was not long back that Ethereum overtook Bitcoin as the largest crypto.
if Ethereum gains power over Bitcoin, it is also possible that money from Bitcoin might be invested into other cryptocurrencies.
IBM and other established firms are betting high stakes on Blockchain might be left in the lurch following a Bitcoin crash. The collateral damage might also take down these companies altogether, it is difficult to have an affirmative conclusion but it not inconceivable.
The Nobel prize-winning economist predicted on 26 January that bitcoin would not be a “permanent feature” of the financial world. Speaking at the World Economic Forum in Davos, Shiller hailed bitcoin as a “really clever idea.” I tend to think of bitcoin as an experiment. It is an interesting experiment, but it’s not a permanent feature of our lives.”
The Bitcoin crash in December 2017 was driven by increasing involvement by USA’s SEC, stricter law formulation by South Korea and fear of regulations from Germany. The Reddit community had to direct troubled investors to Suicide Hotlines as panic ensued.
However, according to Oliver von Landsberg-Sadie, the founder of cryptocurrency brokerage BitcoinBro, South Korea’s stance on making sure that the exchanges know whom they’re dealing with is a very positive step.“However, it did have a hit on bitcoin.”Mr von Landsberg-Sadie added that regulation and the recent correction in bitcoin’s price was a sign the market was “growing up.”
He said: “I think the regulatory environment is one of few factors contributing to this correction, which I see as a very healthy correction. It’s a sign that the markets are growing up and it recognizes that cryptocurrencies are not a tool for money laundering or illicit use.”
With several economists and influencers forecasting a better and stable crypto economy and some completely wary of its presence, the cryptomarket is evolving into a place for interesting technical debacles. It is very rare that the psychology element of crypto is discussed. Several investors have entered the cryptoverse trusting a mere software code. Time will be the best judge for the future of Bitcoin and the simultaneous effect on the crypto-economy.