Cryptocurrencies. Is the market more alive than dead?
Experts dealing with cryptocurrencies fall into optimists and pessimists. Optimists believe that 2018 will mark a surge for Bitcoin and cryptocurrencies altogether. They are convinced governments will make more specific steps to legalize cryptocurrencies. Many experts are confident that Bitcoin will cap its previous maximums and hit unprecedented $30, $50 and even $100 thousand.
Pessimists believe that governments will not soon legalize cryptocurrencies as one of the means of payment due to their volatility and control difficulties.
According to pessimists, Bitcoin is estimated to decline this year and account for $3-5 thousand. Its value is even forecasted to drop at $100.
Experts also mention the security problem, reminding that the cryptocurrency market is vulnerable to hacker attacks. Suffice it to remind the recent case with CoinDesk, a Japanese cryptocurrency exchange that trades NEM coins, hacked for $400 million.
The irony is that NEM smart contracts incorporate technologies positioned as one of the most hack-proof, if not the most. At this moment, the hacking of NEM became the biggest theft in the history of cryptocurrencies on par with the notorious hack of MT Gox of 2014 with $340 million of losses.
As we can see, forecasts are diametrically opposite. The most exciting part is that both scenarios (positive and negative) are equally possible.
One pumper to rule them all
You see, the cryptocurrency market (including Bitcoin) is highly volatile and depends on external factors. Any news or event can cause both growths and falls.
The volatility is inherent to the traditional currency and stock market but in a lesser degree.
Besides, the cryptocurrency market has its established players, so-called pumpers. Considering a rather low capitalization of cryptocurrencies (as compared to the traditional currency and stock markets), the size of pumpers’ assets allow simulating a hype or panic among traders and manipulate them.
As a rule, pumpers create a delusive and overstated exchange rate by purchasing orders. Then, as the hyped demand kicks in and cryptocurrencies hit its peaks, they sell out their assets and the rate goes down spreading panic among investors.
Yet there is another way to influence cryptocurrencies – creating fake news, both positive and negative. As we mentioned earlier, any newsworthy event affects the exchange rate, thus, being in common use among large players.
It makes cryptocurrency a hard-to-predict system. Therefore, predicting what happens to the cryptocurrency is virtually impossible. Yet the fact that it will hardly cease to exist is beyond any doubts.
Blockchain as a basis for ICO
The main importance of cryptocurrencies for the global economy is that technologies allowed for the Initial Coin Offering (ICO), i.e. issuance of own cryptocurrencies to raise funding.
First of all, technologies are relevant for startups since it is more difficult for them to use conventional fundraising solutions such as lending or initial public offering (IPO).
ICO is especially popular in IT. For start-ups, it is even better to use the cryptocurrency they issued as means of payment in their further business activity.
Throughout 2017, the total market capitalization of cryptocurrencies grew almost by $600 billion, from $17.7 to $612.9 billion, i.e. by 34.6 times.
Dozens of ICOs have been brought to successful completion. Interesting business projects that perform ICOs contribute to the overall cryptocurrency appeal.
Telegram’s ICO alone raised $850 million from 81 investors in February 2018, thus, being, the highest figure in the history of ICO. In the second round, Telegram aims to raise up to $1.7 billion as outlined in the white paper – a document that shows competitive advantages to investors.
Extra Credits is another peculiar project. According to developers, that is the world’s first “educational cryptocurrency” project, where users are rewarded with cryptocurrencies of Extra Credits (XTRA) for studying the blockchain and passing online tests.. For enthusiasts, this is another opportunity to earn and extend their knowledge about blockchain.
There is another interesting project by JPMorgan Chase. Jamie Dimon, CEO of JPMorgan Chase, is well-known for his skepticism towards cryptocurrencies, which did not deter the financial holding from launching their own pilot-program to facilitate cross-border payments via Quorum blockchain – so-called Interbank Information Network (IIN).
The implementation is supported by the Australian bank ANZ and Royal Bank of Canada.
Goldman Sachs – another leading American bank – does not rule out the start of trading transactions in bitcoin and other digital currencies.
Therefore, the leading banks’ interest to the new niche can raise the bitcoin status in the eyes of investors and heat the debates around cryptocurrencies as they get deeper and deeper in the world of conventional finance.