Cryptocurrencies—Bitcoin, Ethereum, Ripple, and Litecoin—took a big hit during 2018. In particular, bitcoin, the world leader in digital currencies, plummeted from its all-time high value of $13,860 in December 2017, bottoming out in December 2018 to $3,690. In January 2019, bitcoin recovered about 5% of its 2018 losses, but it has slipped again and leveled off to $3,404 in February 2019.
But the news isn’t all bad, and trading volatility is not always the best measure of market fundamentals. There are signs that the future of cryptocurrency is in synch with the FinTech revolution. In fact, there are predictions that in the next few years, institutional money—corporations, banking, Wall Street funds—will enter the cryptocurrency investor pool.
Investors, scared away by the boom and bust of cryptocurrency values will want to get more involved. Scammers and dilettante investors have moved on, but cryptocurrency shows promise of bouncing back. In fact, rumor has it that crypto could soon be floated on the Nasdaq—adding additional cred and new traction to a bullish crypto market.
Volatility notwithstanding—and even though Warren Buffet says he will never invest in cryptocurrency—cryptocurrency and its underlying technology of blockchain have solid fundamentals. Institutional investment money will be a catalyst as well as a game changer.
For example, Fortune Magazine reports that cryptocurrency traders like Coinbase and Bakkt “are gearing up to serve institutional customers.” Wall Street may now be ready to serve big banks as an exchange resource with the same safety and reliability they enjoy in trading gold, bonds, or equities.
Returning to cryptocurrency fundamentals, there are key indicators that cryptocurrency could become the future of digital commerce and prove the crypto bulls right:
1. We live in a digital world.
Our personal and business lives are being taken over by digitalization. From cashless transactions to the Internet of Things, our world is being transformed and undergoing a digital and industrial revolution. Cryptocurrencies could become the secure and instant way to buy and sell digitally without the middle agencies delaying or taking their cut in the process.
2. Globalization is real.
In the age of a global economy, cryptocurrencies ease the international payments process. Fast—sometimes immediate—processing of transactions, without all the documentation and surcharges are the main global advantages of cryptocurrency.
3. Cryptocurrencies do not need centralized governance.
Cryptocurrencies are outside the control, purview, and management of national banks and other financial institutions. Cryptocurrencies run on the secure peer-to-peer and trust-based system that blockchain provides. Cryptocurrencies are resistant to political volatility and government control and not subject to manipulation.
4. On the other hand, cryptocurrency may eventually be validated by reasonable and reputable international protocols.
The International Monetary Fund and G20 regulators are sure to step in as cryptocurrencies gain traction in international commerce. As such, regulation and cooperation could have the positive effect of further validating cryptocurrency.
5. Competition will stimulate the cryptocurrency “bandwagon.”
Market forces and the fear of being left behind are the bellwethers of free enterprise. As financial institutions become increasingly aware of cryptocurrency and its potential, they may go for deeper investment in blockchain as a proof of due diligence to their clients.
6. Cryptocurrency is popular among the younger generation.
One blockchain-focused company, Clovr, conducted a survey on cryptocurrency use among millennials. Younger, high-earning, men are about twice as likely to invest in cryptocurrency. Likewise, U.S. students, who will enter the working world during the next decade, are more likely to own and use cryptocurrency online. The younger generation will carry those preferences forward and bring cryptocurrency even more mainstream.
7. Cryptocurrency brings real solutions.
Cryptocurrency and blockchain technology have applications in every sector from finance to healthcare. For example, Ripple (XRP) a popular cryptocurrency, is becoming the tool of choice for foreign workers to send money home. Those remittances are a de facto form of international aid. They provide a huge financial income for developing economies from Latin America to Africa and Asia.
The bottom line
Despite the value of bitcoin taking a nosedive in 2018, there are indicators and fundamentals that point to proving the crypto bulls right. Cryptocurrency value, like the Stock Market, has proved to be volatile. However, the crash in value has served to chase away the scammers and push the cryptocurrency more toward the mainstream with potential for further traction.
The cryptocurrency traction is based on a solid foundation of blockchain technology. Blockchain is a secure, locked ledger, which among other benefits, ensures trustworthy financial peer-to-peer transactions. As the world continues to undergo its digital revolution, users will be drawn to using a new medium of trusted exchange: cryptocurrency.
By far, however, the biggest cryptocurrency stimulant will be increased institutional interest and investment. When cryptocurrency investment vehicles land solidly on Wall Street, banks and traditional financial services organization will need to adjust or perish.