Bear Market Birthday: The Crypto Bubble Popped One Year Ago Today

One year ago today, the crypto bubble reached its fever pitch before the inevitable crash that occurred throughout the remainder of 2018 and has lingered into the new year.

Crypto Market Down 84% on Anniversary of All-Time High

One year ago today, the crypto market cap peaked at just under $835.7 billion. | Source: CoinMarketCap

According to CoinMarketCap, the cryptocurrency market cap — which measures the combined notional value of all cryptocurrencies — reached $835.7 billion on Jan. 7, 2018 at approximately 11:17 UTC.

At one point, the aggregate value of cryptocurrency tokens in circulation rivaled South Korea’s M1 money supply. | Source: CIA World Factbook

That meant that, at least on paper, cryptocurrency as an investment class was worth more than Facebook and Twitter — combined — as well as the narrow money supplies of all but eight countries.

The cryptocurrency market cap declined sharply in Jan. 2018 to begin a gradual downtrend that continued throughout the remainder of the year. | Source: CoinMarketCap

Today, however, the cryptocurrency market cap sits at just $136.3 billion, representing an approximate decline of 84 percent. Even more remarkable is that this occurred even as the number of crypto projects tracked by CoinMarketCap has swelled to 2,086.

Ripple Worth More in Jan. 2018 than Entire Crypto Market Cap Today

Notably, the cryptocurrency peak occurred several weeks after market bellwether bitcoin first fell into decline. The introduction of bitcoin futures in mid-December seems to have punctured the bitcoin price bubble, as the flagship cryptocurrency peaked near $20,000 just days after its futures contracts began trading on regulated US exchanges CBOE and CME.

However, that capital did not flow out of the cryptocurrency markets, at least not at first, because the altcoin bubble continued to inflate at a wild clip through late December and the first week of 2018.

Bitcoin’s share of the crypto market cap cratered in January 2018 as ripple (XRP) and other altcoins resisted the pull of the bitcoin price decline — at least for a week or two. | Source: CoinMarketCap

That bubble was largely driven by the price movements of ripple (XRP), which became the poster child for retail-driven speculation even as its backers sought to market it as the suit-and-tie cryptocurrency built for banks and other financial institutions.

Ripple was particularly popular in the South Korean market, where the “Kimchi Premium” drove the token’s global average as high as $3.84. On Monday morning, the ripple price was sitting at $0.366, representing a one-year decline of more than 90 percent.

The ripple price peaked at a global average of $3.84, driven by rumors of a Coinbase listing (which still hasn’t happened) and South Korea’s “Kimchi Premium.”

At its peak, ripple — then the second-largest cryptocurrency behind bitcoin — had a market cap of nearly $149 billion, which is more than $13 billion more than the total crypto market cap today.

Of course, ripple wasn’t the only cryptocurrency to take a 90 percent or greater buzz-cut from its early 2018 peak. Other major coins and tokens also holding that dubious distinction include bitcoin cash (96 percent), litecoin (90 percent), tron (92 percent), cardano (96 percent), monero (90 percent), dash (95 percent), NEM (97 percent), NEO (96 percent), and zcash (94 percent).

Searching for Crypto Winter’s Silver Lining

Advances in the Lightning Network and other scaling technologies shows that the crypto bear market has not been a fruitless time for the industry.

Needless to say, 2018 was a tough year for investors. However, it wasn’t all bad for the cryptocurrency ecosystem as a whole. The bear market forced investors to eye projects with greater scrutiny, and regulatory crackdowns have all but killed the initial coin offering (ICO) market but will hopefully result in new legislation that promotes true innovation while protecting investors from fraud.

Most importantly, the bear market did not stop developers from continuing to build out the technologies that will help bitcoin and other cryptocurrency networks scale to accommodate mainstream adoption, whenever that does arrive. The Lightning Network (LN), for instance, has continued to see its total capacity grow, despite the fact that the bitcoin price has been in decline. Moreover, the median bitcoin transaction fee has fallen to a more than three-year low, even as the network processes about 75 percent more payments on a daily basis than it did the last time fees were this low.

That’s not to say the work is complete. Fraud is still far too common in the crypto industry, and many much-hyped applications of blockchain technology have yet to demonstrate to utility compared to their centralized counterparts. And somehow, $700 billion in losses later, many projects still seem overvalued. (Dentacoin — “The Blockchain Solution for the Global Dental Industry” — has an implied market cap of $64.9 million.)

Nevertheless, as investors await the next great bull run, the industry will hopefully emerge from Crypto Winter as a more mature ecosystem, one better prepared to establish itself as more than a passing fad.


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Author: Josiah Wilmoth
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Bitcoin Only ‘Masquerades’ as a Currency: BIS Research Chief

Hyun Song Shin, Economic Adviser and Head of Research of the Switzerland-based Bank for International Settlements (BIS), told Bloomberg that bitcoin and other cryptocurrencies “fall a long way short of being able to sustain a monetary system” and really only “masquerade” as real currencies.

LIONBIT

Speaking in the latest episode of the Bloomberg Benchmark podcast, Shin argued that money, in the form digital cash or tokens, is a “record keeping device” and is essentially worthless — its value is only increased when others begin accepting it.

Is Bitcoin a Bubble?

Last month, Agustín Carstens, general manager of BIS, called bitcoin “a bubble, a Ponzi scheme and an environmental disaster.” When asked about Carstens’ statement, Shin said that miners have two incentives for verifying transactions. They collect their reward in the form of bitcoins as well as transaction fees paid by users.

If the capacity of the network is increased, not only will the problem be solved but the transaction fees would also become zero. Hence, miners will lose their incentive to verify blocks and this is where “the economics really bump into technology.” Shin added that while this statement is true for bitcoin, however, other cryptocurrencies may provide better solutions.

Bitcoin’s Finality Problem

“What is a valid payment depends on what the bookkeepers agree is a valid payment. It is the result of a collective decision of the bookkeepers themselves,” said Shin regarding bitcoin’s finality issue. Since miners interact with each other, it is theoretically possible that they may group together and agree on creating a hard fork. As result of this, the transactions on the previous “branch” would become useless and invalid. Therefore, he alleged, transactions made on blockchains are never 100% valid and can result in a disaster.

Will Bitcoin Replace Traditional Money?

Shin said that regulation shouldn’t be a big issue for cryptocurrencies. However, cryptocurrencies’ connection with the traditional monetary system has raised some concerns from regulators. Some people have started calling them financial assets, while others have used them to lure people into fraud. These situations have sparked a debate over the importance of crypto regulations.

When asked about blockchain technology in general, Shin said that it has many useful applications all over the world, “I think where it becomes much more difficult is when the technology takes on the attribute of a financial asset, which then masquerades as a currency. And then gives rise to promises that may not be fully fulfilled.” Shin concluded that even if crypto technology is improved, the problems in economics will continue to exist.



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Cryptocurrency: The Bubble Is Over, Here Comes The Boom

Like the early stages of the dot com boom, the initial speculative crypto bubble is over. Expect waves of rapid evolution next, as maturity kicks in and serious players emerge and scale.

If you’re thinking cryptocurrencies have been an embarrassing speculative fad full of shady offshore players you’d be largely right — but we are also now arguably at the end of the beginning and moving into a far more interesting era. If you’re also old enough to remember the early stages of the dot com frenzy in the mid 90s, you’ll remember a similar scenario: Outrageously ambitious business plans based on unproven new technology and markets, endless hand waving self promoters and scammers confusing perceptions of reality, cliques of technology experts, and VCs and suits pumping up their market segment positions.



The naked greed and quick buck speculative atmosphere around cryptocurrencies resembles the rapid rise of the web 1.0 dot com era — from ugly, confused, and often corrupt beginnings rose the industry that today dominates the world and the financial markets. Just look at mid 1990s print magazine articles and TV shows — before everyone was on the internet — for evidence.

           

 

I recently met with the organizers of next  week’s Distributed2018 conference in San Francisco to get their perceptions of where we are after the recent speculative bubble deflations around bitcoin and other cryptocurrencies. In my opinion, speculative frenzy has overshadowed far more fundamental shifts in the maturation of a space, which, in certain important areas, is rapidly gaining sophistication, scale, and security. The irony of our meeting up to discuss this in downtown San Francisco’s post Amazon retail apocalypse of empty store fronts, victims of the crushing success of the dominant online sales platforms, wasn’t lost on any of us.

Distributed2018 is an interesting event, and a laudable effort to help east to collaborate and share thoughts with west in San Francisco, Calif., with significant participation from Chinese, South Korean, and Japanese conference organizers and attendees. The organizers are striving to create a credible discussion forum nucleus for the serious side of cryptocurrencies, blockchain and smart contract business logic in a world awash with hype, hustle and zero calorie content events.

The organizers feel we have definitely been through a reality check phase around cryptocurrencies, with a lot more hard questions being asked around investment in previous generation of Initial Coin Offerings (ICO’s) and more importantly upcoming launches. Just like in the early dot com days the rear view mirror makes for some pretty bizarre viewing of the routes taken to get to where we are today (misinformation, speculation, hyperbole, and mis-steps), but the route forward looks very interesting indeed as the space matures and regulation around the world begins to start to catch up. More importantly, serious financial market interest is building around ‘old money’ onshore regulated investment in credible ventures.

Crowdsourcing — Kickstarter projects, etc — were originally a web 2.0 phenomenon to help quickly fund ventures via lots of small contributions from interested parties worldwide, instead of the slower route of pitching angel investors and venture capitalists. ICOs crowdsourcing origins subsequently grew to be a mutant monster of this approach, and just like the dot com boom has been driven more by greed than logic with a few exceptions. In my opinion reframing ICO thinking as early stage investment in promising ventures is a healthier way of looking at this going forward, and given the way venture capitalists have been buying the ICO coins of credible start ups to hold stakes in them, this appears to be the way of the future. Many venture capitalists are also now writing restrictions on ICOs into their terms and agreements in order to protect their early stage investments from dilution.

The hard facts are that despite all the endless hype about innovation and start up culture, venture capital, angel investment, and corporate budgeting is inadequate in a world that is moving ever more quickly. Investing in ICO coins or tokens as ownership of ‘early stage shares’ in a business entity you believe in is a healthy VC like approach — and just like VCs, If you don’t understand the business model, stay away. The Distributed2018 organizers agree — the pace of innovation and change worldwide needs a new, more agile digital framework to support the speed at which business opportunities evolve and mutate, and the pace is only likely to get faster.

Taking a long view on the maturity of crypto currencies, the world wide web from its infancy is barely 25 years old, the iPhone ignited and quickly matured the smartphone and apps revolution 11 years ago, and Facebook, which this summer is rumored to be contemplating a cryptocurrency payments system for use on their platform via a company wide blockchain platform, only reached meaningful scale (launching ‘like’ buttons etc) around 10 years ago.

Bitcoin is nine years old, and Ethereum launched via crowd sale in 2014 — barely four years ago. The short video above amply illustrates the febrile atmosphere around the hundreds of ICOs that launched in 2017 — the cause now of this year’s dot com like a reality check.

We’ve just come through an initial period of ICO pyramid and pump-and-dump schemes that have been all to similar to early stage dot com scams. Decentralized applications (‘Dapps’) have had high market caps but low user numbers, with indexes generating significant revenue from speculators. The big shift has to come though, not least to break the current business monopoly of centralized platforms — Facebook, Google, Amazon — with many anticipating tokenized mobile device Dapps will soon be the next big business wave that disrupts the current platforms deadlock.

Now things start to get interesting. Remember the old dot com joke about crazy, loss making startup business plans to sell dog food online? Last year, an age ago in the digital economy, Petsmart bought online dog food vendor Chewy for $3.35 billion. Similarly, ignore the business maturation and evolution of cryptocurrencies at your peril.

Close to 70 percent of the world’s population own smart phones, but currently only 1 percent of these smart device owners use cryptocurrencies. Facebook and others are sure to legitimize transactional use of their own currencies to defend their moats, but in my opinion, the huge opportunity to decentralize business transactions and incentivize consumers to lock into preferential cryptocurrencies is now looming large on the horizon, and a great commercial engine for the ‘splinter net’ (both positive opportunities for small players and another platform threat from the giant global corporations). Add in the global implications of the parallel digital explosion in Asia to be explored at Distributed2018 this week, and we have a very interesting new wave of change and innovation looming…


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Oliver Marks
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Cryptos Are Similar to the Dotcom Bubble – But Why is that Positive?

It has been discussed in the last years whether cryptocurrencies and crypto startups are like the dotcom bubble back in the 90s. And this is a very valid relationship that allow us to think how can we prepare for the future.


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Are Cryptos Like the Dotcom Bubble?

According to the CEO of eToro, Yoni Assia, over 95% of the startups that people is funding right now, will not exist anymore. At the moment, eToro is supporting a wide range of virtual currencies, including Bitcoin, Ethereum and EOS.

But similar comments have been made by Joseph Lubin, co-founder of Ethereum. He compared the cryptocurrency boom to the dotcom bubble.

During a press conference at MoneyConf hosted in Dublin he said:

“If you look at the dotcom boom and bust, there were so many of the same issues back then. SO much money invested, lots of money lost, lots of failing projects.”

And the list of figures commenting about different virtual currency projects in this way is not over. Dominik Schiener, creator of the IOTA cryptocurrency, said that in the future, less than 10 of the more than 1,600 cryptocurrencies in the market will survive.

It is important to mention that the projects that will be able to survive, will be giving to the world an important value that before was inexistent. During the process an important number of projects will not be able to keep growing and working. But this is part of a wider process of creation that will see a few projects succeed and change the world as we know it today.

Assia commented about the possibility that several projects have nowadays:

“You have something that you’ve never had before, not even in the dotcom bubble: if you have a genius idea now and you put a whitepaper on it and suddenly you have 100,000 millionaires reading it and saying ‘hmm, that’s a really good idea.’ If 1,000 put in $10,000 – which is not a lot of money for those 100,000 – you just raised $10 million for your ICO. That scale has never happened before.”


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Author:  Carlos Terenzi
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Wikipedia Co-Founder: “The Crypto World is Absolutely, Definitely in a Bubble”

The co-founder of Wikipedia has once again publicly denounced cryptocurrency. James Wales told a European Blockchain conference that the entire digital currency space was in a bubble that was certain to pop.

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James Wales: “Right Now, We are in a Bubble”

The Wikipedia co-founder was speaking at a blockchain conference held in Berlin. During his ‘top secret’ presentation at the Blockshow event today, Wales slammed cryptocurrency, stating that it was in a bubble that would inevitably pop. According to MarketWatch, he said:

“Right now, we are in a bubble. The crypto world is absolutely, definitely in a bubble. I don’t think there’s many people who would deny that.”

The co-founder of the planet’s largest free reference site went on to state that the cryptocurrency industry was lacking ‘real journalism’ and that the entire sector should be prepared for a shock when the market eventually crashes.

According to another report of the conference in tech publication SeekingAlpha, Wales went on to indicate that he had no idea when the bubble would burst:

“The thing about bubbles is that you never know when they’re going to end.”

Despite their co-founder’s pessimism, those behind the Wikipedia platform are still happy to accept donations in Bitcoin. The page dedicated to funding methods reads:

“As of late April 2018, our Bitcoin processor has deprecated their services, and we are searching for alternatives. We apologize for the inconvenience, and hope to have the Bitcoin option available again soon.”

Also today, Wales spoke to the U.K.’s Evening Standard about Brexit and the opportunity it presents the British Isles to attract technology startups to the nation. He stated that it was important that government ministers did not turn London into a ‘hostile place’ for tech specialists to work in after the scheduled 2019 split with the EU.

He went on to express concerns that the likes of Berlin could offer a more welcoming environment for developers and startups alike. However, the likes of CryptoUK are working towards ensuring that British regulators can create a framework that both protects investors whilst allowing the rapidly evolving industry to continue to innovate on their shores.

Wales joins the likes of Warren Buffet, Charlie Munger, and Jamie Dimon in his criticism of cryptocurrencies. However, unlike these household names of traditional finance, he has yet to resort to petty, baseless name calling to voice his scepticism of the digital currency space.

Meanwhile, there remains several prominent names in the crypto bulls camp. Tom Lee, the Fundstat co-founder believes that Bitcoin will reach $25,000 by the end of 2018 and once bullish momentum begins, it will only take a few days to get there.

However, such predictions look minuscule when compared to that of Reddit co-founder Alexis Ohanian. Earlier this month, he stated that he thought $15,000 per Ether coin and a return to Bitcoin’s all-time highs of almost $20,000 were likely. That would represent around a 27 times increase on today’s ETH prices.


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Rick D.
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