Given that my entire working life is spent in the cryptocurrency space, it would come as no surprise that yes – I’m bullish on the stuff. But I’ve been bullish longer than most – in fact it was in 2011 that I decided Bitcoin had a place in the future of payments – even if it was just for simple online gambling apps back then. The cryptocurrency market has changed and diversified enormously over the years, and its applications are now far more powerful than the simple payment-style applications that I had expected. For many investors in the latest wave of hype, this history of cryptocurrency is not fully understood, and its future direction perhaps even less so. Those who fall into this category will understandably be horrified when the price of their asset falls by as much as 80%; without an understanding of the above, there is no hope for a successful long-term investment, only a swift exit from the market when the volatility proves too much.
This reminder will come too late for those who lost faith in the technology (or had none to begin with) and decided to cut losses, but for those that bought near the all time high and have so far held on or accumulated more this article should indicate that – as impossible as it may seem – enormous growth potential that awaits.
While the mainstream media speculates on the death of Bitcoin:
- The Winklevoss twins hired the New York Stock Exchange CIO for their Gemini exchange platform
- Facebook created a new role for their most senior engineer; “Director of Engineering, Blockchain”
- Ant Financial, a $150bn firm owned by Alibaba very recently announced that they’ll be implementing blockchain at a large commercial scale in future
- Microsoft and EY teamed up to pay royalties via JP Morgan’s blockchain, Quorum – a private Ethereum network that is designed to develop and evolve alongside public Ethereum
- Coinbase launched a custodial service in partnership with ETC (an SEC-registered broker-dealer) to secure funds for institutional investors (reminder – institutional investors are still largely on the sidelines)
- Venture capital firm Andreessen Horowitz – an early investor in Airbnb and Facebook – created a $300M cryptocurrency fund
- An SEC official stated that Bitcoin and Ethereum “are not securities” after several months of regulatory concerns from investors.
These are some of the recent public announcements that would somewhat contradict claims that “the end is nigh”, and doesn’t touch upon the technical Layer 1 protocol improvements and Layer 2 off-chain improvements occurring in the industry; or the platforms which are building and launching Ethereum-based applications that offer more compelling use cases with each release.
Here the rate of development is increasing and scaling improvements such as Bitcoin’s Lightning Network and Ethereum’s Plasma Cash are well underway. Crypto-collectable applications such as Epics.gg and Zombie Battleground are also emerging following the success of CryptoKitties (which raised $12m from Andreessen Horowitz in March 2018); realizing a new type of digital commerce that was previously impossible. New token standards are being solidified on Ethereum to determine how tokens (fungibles, non-fungibles, hybrids and others) should behave on the blockchain, simplifying the ecosystem and enabling even faster development in the future.
Despite all of the above, we are clearly still in a bear market, one which may well lead to horizontal prices for months or years (as it has done before). It is impossible to predict when the next bull run will occur, but with the fundamental value of this technology increasing each day, it is only a matter of time before the markets catch up.
In the meantime…
While the long-run outlook could not be better for the likes of Ethereum and Bitcoin, there are still short term gains still to be made with other cryptocurrencies. One such crypto that would be worth keeping an eye on is Zilliqa (ZIL), a smart contract platform similar to Ethereum but that incorporates sharding – an improvement to scaling that will also be applied to Ethereum but not until 2020. In a very cynical sense, and following the launch of EOS which accumulated $17b in value before crashing to $6.5b shortly after its June 2018 launch, ZIL may experience a similar level of hype in the lead up to its September release later this year. With a market cap of “just” $600m, it could well reach multiples of that before crashing following launch (when investors/users come to terms with its likely low adoption/bugs/issues as with EOS).
Full disclosure, I have invested in ZIL and intend to exit a proportion of these holdings in the lead up to launch, holding back a % that corresponds to its likelihood of successfully competing with Ethereum; always do your own research!