My Outlook on the Crypto Market

It's not hard to support a case for or against the cryptocurrency industry in it's current state.  The evolution of this new market has an interesting story. In the beginning, Bitcoin had a tainted start as it gained a lot of it's initial popularity on the 'dark web' because of it's security and anonymity features.  There was a lot of negative connotations around Bitcoin, but it continued to gain media attention and the value of the underlying technology started to gain some traction.  Other projects joined the party such as Ethereum and Litecoin, bringing new features and opportunities.  As the media continued to report on both the positive and negative stories (for which there was no shortage) we saw the prices skyrocket in November/December of 2017.  Whether they understood it or not, people were intrigued by this new technology bandwaggoning into the market which caused these insane price moves.  

Because of this 'crypto craze' the market has been flooded with new 'opportunities' including companies, projects, coin offerings etc.  Some of these projects are legitimate, while others are smoke and mirror projects intended to deceive potential investors. Because cryptocurrrency is a new and very complicated technology (especially for the non-techy), this has created more fear amongst the general public, and rightfully so. To quantify the craziness, although we typically hear about Bitcoin, there are currently over 1600 different cryptocurrencies on the market.  Of them all, I believe that maybe 5% of these will continue on as viable industry leaders.

It's also challenging to explain the industry to newcomers, as they often are looking at the price chart for Bitcoin for the past 6 months, which has plunged from $20,000 in December to it's current price of around $6,500.  The misconception being that this encapsulates the Bitcoin story, however Bitcoin was created in 2009 (valued at less than $1) and has seen continued exponential growth over that time, leading to the boiling point at the end of 2017.  So, over the past 9 years, the price of Bitcoin has gone from pennies, to over $6,500! But regardless of price, the point I'm trying to make is for the future growth of the technology itself, not the obvious vulnerability of the price.

The industry has often been compared to the .com bubble, which I think is a great analogy.  There's no arguing that the crypto market was and is in a bubble, and that we are in the midst of a volatile ride.  Although there will be a lot of carnage, just like the .com scenario, the underlying technology is going to emerge along with the industry leading companies to change the way the world processes information.  

So... What is the technology and where is it heading? At an elementary level, Blockchain technology is the idea of a decentralized network of computers that collectively encrypts and processes transactions.  Each transaction is encrypted and broken up into 'blocks' which are sent out to the network, they are then re-assembled and validated on the other end which creates the 'blockchain'. As these transactions are processed by computers worldwide, participants are rewarded for their involvement with the associated network currency, such as Bitcoin.  As such, this solution provides a very large scale, decentralized, secure means for processing any kind of transaction on a global scale.  That being said, because this is a developing technology, it is still constrained by the number of transactions that can be processed at any given time. This is currently the main point of contention for all crytpo networks, most of which have detailed road-maps for larger scale operations.

There is a lot of expectations for the continued development of cryptocurrencies and blockchain technology, but keep in mind, they are all still in their infancy stages. With all the hype and excitement, it's easy to loose track of where we are in the life-cycle of the crypto timeline.  Fear, greed, excitement and every other emotion are largely what governs the movement of prices.  The perception of both enthusiasts and nay-sayers will continue to cause volatility.  People get excited about the potential, but then realize we're still at least a year away (in my opinion) from the technology to be properly implemented into real world applications.  New developments and headway continues to be made week after week, which the media portrays as 'groundbreaking' which they are in a sense, but most of these advancements are all mapped out for any given cryptocurrency on their publicly accessible road-map (whitepapers).  

This scenario also leads to a lop-sided scale in terms of the production and demand of any given crypto coin.  As coins like Bitcoin are produced through a process called 'mining', large companies as well as individuals are producing large quantities of coins.  In order to realize their profits, they need to sell those coins in the open market, which is a constant flow of coins being sold.  In order for the price to rise, this has to be met by an industry demand of people wanting to purchase said coins.  As the real-world adoption is still taking place, the scale is tilted which is contributing to the recent price decline.  As the story continues to unfold, the technology develops and more real-world applications are revealed, we will start to see the demand for the coins match and surpass the production.  

To be clear, I'm not suggesting to anyone that they should invest in  cryptocurrency, but instead I'm  looking to have a discussion and convey my belief that this technology is very interesting and will be around for many many years.

  

If you're still uncertain about the legitimacy of the technology, here's a few companies that are actively committed to supporting it's development:

• Walmart: The largest company in the world has committed to implementing blockchain technology throughout it's global delivery system.  They believe blockchain provides a secure and efficient way for processing transactions and managing the back end data solution.  Walmart has been submitting patent applications on a regular basis to secure these new ideas and initiatives.
• IBM: A leader in the technology space, IBM
• OMERS: The Ontario Municipal Workers pension fund, the largest in pension fund in Canada, and has committed MILLIONS of dollars to supporting the development of the Ethereum project.
• Amazon: The largest online retailer in the world, has shared plans for supporting the cryptocurrency space in various ways including accepting them as a form of payment on their platform. They've already registered several crypto-related domain names to protect their place in this space.  
• Starbucks/Microsoft: In a recent announcement (last week) Starbucks and Microsoft have teamed up on the development of a crypto payment solution which will allow patrons to use crytocurrency (converted within the app) to pay for in-store products.