When we last wrote about the cryptocurrency bitcoin in 2017, volatility was the name of the game. At the time, bitcoin was seven years in, and the currency was seeing ping-ponging valuations, low or no impact on economies worldwide and very little payment infrastructure to facilitate consumer use. As we check in on cryptocurrency at the end of the third quarter of 2018, we find a lot more acceptance of bitcoin and cryptocurrency generally as a payment method, but an exchange that’s still plagued with the same market volatility. In fact, as of this writing, the entirety of the global cryptocurrency market has lost $20 billion in market capitalization just in the last 48 hours alone.
While market value and investment is but one measure of success – and most bets are on bitcoin as the principal player – what the investment exchanges cannot accurately quantify is its projective potential. In 2017, we described cryptocurrency’s value at that stage of development “as optimistically hypothetical.” Now in 2018, we move well past the hypothetical with a building infrastructure and increasingly pervasive acceptance of the concept of cryptocurrency – money without a centralized issuing body to back up its value. So far in 2018, all signs internationally and domestically are pointing toward a crypto future.
Instead of retrenchment, global political instability may actually be setting the stage for the spread of cryptocurrency. As long-standing alliances and economies are tested, institutions and individuals are looking for new ways to work. For instance, Iran is launching its own cryptocurrency as a way to energize its economy and facilitate growth despite the specter of sanctions from the west. Unlike decentralized currencies like bitcoin, Iran’s cryptocurrency will be backed by the government’s central bank. China, on the other hand, is in the process of cracking down on the propagation of cryptocurrency, seeing new forms of money as a threat to its own central bank. The Chinese are even going as far as blocking the mention of blockchain on social media and banning hotels from hosting cryptocurrency conferences.
While the currency may not be welcomed as a rival to a home country’s economy, Asian funds are actively involved in cryptocurrency investing in U.S. markets. Though they may not expect to see cryptocurrency competition in their own country’s economies just yet, the impact on global trade is undeniable. In more western-based economies, bitcoin is booming. In South Africa, for example, bitcoin mining is fueling a bit of modern-era gold rush. In Greece, an economy ravaged by economic distress, more cryptocurrency ATMs are poised to come to the island nation via a homegrown cryptocurrency entrepreneur. One of the early adopters, the country got its first cryptocurrency ATM in mid-2015.
Here in the U.S., bitcoin is becoming a household name as young people own and use it. A new survey finds that at 18%, twice as many students own cryptocurrency compared to the average consumer. In a recent article about cryptocurrency’s future, the author rightfully points to young people as the world’s early adopter generation, saying, “Students are often seen as bellwethers of cultural and technological change. Facebook, now the world's largest social network, was initially open only to students and found mass adoption among the world's youth before spreading to older generations.” Further, students want classes on crypto, and a stunning 42% of the world’s top-50 universities are delivering, offering coursework on blockchain technology or cryptocurrency economics.
Regarding the gamble, most investors see investment instability as part-and-parcel to the introduction of new technology, but even that may be changing. To address cryptocurrency’s well-known volatility, entrepreneurs are banking on new technology to reduce the risk. These “smart banking ecosystems” are using blockchain as the backbone technology to provide a platform to manage cryptocurrencies, fiat money and stocks all in one place. From an investment standpoint, institutional investors are still bullish on the technology and consumers are still in love with the strike-it-rich element of bitcoin, especially in small towns and other economically distressed areas still struggling.
In our next installment, we’ll revisit blockchain – the technological backbone of bitcoin and other cryptocurrencies – to see if it’s living up to the hype.
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