Emerging Markets and Early Adopters
When you consider that the cryptocurrency market remains highly volatile and largely unregulated, it is still highly speculative to invest in any of it. The road to mass adoption is not without significant hiccups. We need to give blockchain technology time to mature. If given that time, all these daring and promising startups will have to prove themselves. It is just like any other company and any other technology. Even though there is much debate around the question. How we should deal with blockchain and cryptocurrencies in the coming years, history shows us. The first reactions to any major scientific breakthroughs were never all-out positive from day one.
Besides, this market has enormous potential when you think of the possibilities for potential growth on investments in the long term since it is still in its infancy stages. Some of these projects are here to stay, and many more are starting every day, introducing healthy competition which is not only going to boost the fin-tech industry. There is an ever-increasing demand for skilled people in the blockchain sector. Businesses cannot seem to find enough software engineers and blockchain developers, and everyone can get into it – take several free courses available on the internet to get you up to speed and develop new skill-sets that might boost your career and give you a new direction – this industry is just getting started. Not to mention the fact that the younger generations have been growing up in the digital age and the impact this makes on their lives cannot be unseen.
Distributed Ledger Technology
Mainly, the success of blockchain technology has already been set in stone since it’s not dependent on cryptocurrency alone. Where blockchain can serve as a decentralised ledger that securely stores immutable data. We can also use it as such without the use of any cryptocurrencies. Cryptocurrencies or tokens might be used on specific networks. Because they serve a particular function. They might function as a utility token or as a means of payment to the network or to store, capture or move value around in the form of digital currency.
We believe blockchain is here to stay. Moreover, it will be an integral element in our future infrastructure. The challenge is to oversee and guide the adoption process. For example, it is almost inevitable that private blockchain infrastructures are going to be used by governments and corporations. Good or bad? That’s a loaded question as there might be more than one answer. Even though it may sound bad for cryptocurrency or blockchain. In general – adaptive governments and nimble and experimental regulation, legislation and compliance policies will be of crucial importance to propel development forward. Let’s look at some numbers.
Historical Market Overview
As the mother of all things crypto, Bitcoin holds the lion’s share in the total cryptocurrency market at the point of writing. The historical charts  and the table below show some key historical figures in terms of cryptocurrency market capitalisation. Please note the enormous volatility that haunts this market up until this day. And the rapid increase of cryptocurrency and blockchain-based projects that make up this market. The total market cap, the volume traded over the last 24 hours. The ratio of BTC dominance relative to total market capitalisation are subject to market activity and dynamics. Hence these values are subject to change and only serve as a first insight into the cryptocurrency market development of the last few years based on only a few parameters.
The charts also show an immense amount of volatility in cryptocurrency markets. As you can see, total market value has been hovering around $1-2B in 2013 and peaked right before 2014 up to values to $10B, it then remained rather constant up to 2017 where things started moving after massive amounts of liquidity entered the market. It has since then peaked at just over $800B early 2018 and has been receding ever since, with the occasional upward movements over a relatively small time-span. Speculation and hype drove market capitalisation through the roof in late 2017 and early 2018. Everybody was talking about cryptocurrency and blockchain in those days, but regular fear-mongering sentiment has returned, and people tend to be very sceptical of the future for cryptocurrency.
Historical Market Overview
What we believe to be very important and a thing we specifically want to emphasis is that it is imperative to zoom out to understand the scale of this economy. All these billions of dollars might seem like much money. But let us put all that money in perspective shall we? The following image gives you a feeling of the size of this market when compared to some of the main markets worldwide.
Can you even imagine a billion or a trillion dollars? Cryptocurrencies are a hot topic. Not only during the bubble of late 2017 and early 2018. However, as soon as the hype was over, the trend reversed. Sheer panic, many people sold their assets at terrible losses and are now determined never to touch cryptocurrencies or blockchain technology again, feeling robbed. On the other hand, many people who got in earlier (2013-2017) might have gotten rich quickly. We think that this market is about innovation and change. So, the opportunity that comes with it can provide you with disruptive profits.
Furthermore, it is about people and projects using new technology to bring us incredible things. The majority of people in the west already have access to financial applications, credit and the financial system. As long as nothing drastically impacts their standard of living, there is no immediate sense of urgency and certainly no specific need to get to know or let alone even use Bitcoin or any other cryptocurrency for that matter.
Cryptocurrency in Perspective
What then, about all the people in other areas around the world who don’t have easy access to financial services such as banking applications, regular bank accounts, mobile money transfers and the like. Necessity drives adoption, and if there is an urgent requirement, real-world use case and application sprout naturally. Many countries where people don’t have access to the financial system are already using new technology to gain access to such services. This technology has the potential to drastically impact and improve the quality of life for many people around the world.
Although it sounds fantastic, many of these projects still have a very long way to go. It is precisely why this isn’t a get-rich-quick scheme for us. However, an investment for the (hopefully near) future. Looking at the scale of the different global markets and the stage of blockchain and cryptocurrencies at this point in time and the problems that are yet to be solved. It is going to take some time for this market to get rid of the volatility and speculation, create liquidity, rid itself of bad actors and get regulated. All of this and more is needed to facilitate the way to mass adoption.
Cryptocurrency Market Compared to S&P500
The derivatives markets hold vast amounts (trillions) of dollars and might sound unfamiliar. What about some of the worlds biggest companies? Let us have a look at some of the top companies listed in the S&P500 (Standard & Poor’s 500 Index). The S&P500 is a market-capitalisation-weighted index of the 500 largest U.S. publicly traded companies by market value. The total value of the cryptocurrency market worldwide has come relatively close to the value of a globally recognised corporation. For example, Apple or Amazon back in January 2018 but has dropped significantly since. Massive volatility is plaguing this emerging market due to lack of regulation, liquidity and real fundamentals.
Nevertheless, as indicated before there are close to 2000 projects or cryptocurrencies which each have their individual and unique goals and ambitions. Some (not all) are utilising revolutionary new technology and can be very disrupting to existing markets (and thus companies!) in the long run. It might be possible that out of the current 2000 projects – with entrepreneurs around the world launching new projects almost every day. Several next-generation companies are bound to emerge.
Although the cryptocurrency market might have similarities with big corporations in terms of market share, the point is that many cryptocurrency projects are fundamentally different from regular companies or corporations in the way they operate and function. We highly anticipate at least several successes where blockchain-based projects. These might have a considerable disruptive impact. In the long term, this will lead to an increase in market share. It is driven by the revolutionary new fundamentals and business models of these new businesses.
Alternative Cryptocurrencies (Altcoins)
Bitcoin used to dominate the cryptocurrency market up until the altcoin and ICO boom in 2017. The word ‘altcoin’ is a combination of two words: alt and coin. Alt signifying alternative and coin meaning Bitcoin or cryptocurrency. So,together they imply a category of cryptocurrency that is alternative to the digital cryptocurrency Bitcoin. After the success of Bitcoin, many other peer-to-peer digital cryptocurrencies have emerged in an attempt to imitate that success.
Many of these altcoins have built upon the necessary frameworks provided by Bitcoin. Or, they have developed their blockchain architecture. Because of the decentralised and distributed architecture of most blockchain networks, most altcoins are peer-to-peer, involve a mining process by which users solve severe problems to unlock blocks. Moreover they offer efficient and cheap ways to carry out (value) transactions on the web.
However, even with many overlapping features, altcoins vary widely from each other – altcoins differ themselves from Bitcoin with a range of procedural variations. It is including different consensus algorithms, transaction speeds and levels of scale-ability. They also deploy various means by which users can mine blocks and get rewarded and make use of application enhancements to. For example – increase user anonymity. As mentioned earlier, there are close to two thousand cryptocurrencies at this time, and that number is growing. Performing fundamental analysis on altcoins is a must before you make any decisions. Moreover, we’ve outlined the basics in the cryptomanual. Ever since the altcoin explosion in 2017 – Bitcoins dominance has decreased significantly due to ever-increasing numbers of promising projects.
Initial Coin Offering (ICO)
It is incredible to realise how much the altcoin market has grown in the last two years alone. ICOs have become so popular. So, it well over 90% of total funds raised through this mechanism came from 2018 alone. While it’s hard to put this sudden ICO explosion in context, there are animations and infographics out there that do the phenomenon sufficient justice. Moreover, it shows a timeline of ICOs and funds raised since early 2014.
There’s a big difference between a typical ICO now and one in 2017. A staggering amount of ICO’s didn’t even make it to an exchange. According to a study performed on the quality of ICO’s by Statis.
Most of the money is now being raised via private offerings, while public token sales have become rare. Why? Plying retail investors with high-stakes propositions. So, it could (and often do) lose them a ton of money is not a good look. Most ICO projects these days are also taking steps to comply with regulators as almost all ICOs are considered to be securities. Bart Stephens, the co-founder of Blockchain Capital, told The Wall Street Journal that what we are seeing is the normalisation of the ICO market.