Are Cryptocurrencies Really in A Bubble?
It is natural to assume in a world of manipulated news and insider trading, the most influential powerhouses running both the media and banking industries, who ironically once branded cryptocurrencies as a ‘fad’ are beginning to realise they missed out on the initial booms from the past 5 or so years and as a result have begun flooding warnings and fear amongst the general public that we have reached the ever-feared ‘bubble’.
It’s understandable why this theory can be deemed correct and that is mainly due to Bitcoin reaching an all-time high of $5,000 and Ethereum soaring to $400 twice in the past 2 months. Making several thousands of percentage gain in a year is attracting new waves of interest just like the stock market did before the inevitable crash in 1929. Instead of stock tips nowadays, it’s no longer a surprise to hear Bitcoin name-dropped in conversations from somebody you would likely never expect to be aware of its existence. But that is exactly what is happening, nothing more and nothing less. People are beginning to give tips that Bitcoin is the ‘next best thing’ with no value behind their claims and are enticing others to invest without understanding themselves that these rises in price did not simply come without the dramas.
A ricochet effect is happening so to speak, where investors who do have experience in markets such as Stocks and Forex, but have no extensive experience of the Cryptocurrency market conditions will be quick to compare the current happenings to the stock market and assume we are in ‘overvalued’ territory, especially when backed up with claims from some of the largest media outlets such as The Guardian and Bloomberg to name just a few.
Markets for all investment types are driven by fear and greed, it is the underlying processor behind our choices in life and amplified tenfold when it is our hard-earned money on the line in a running investment. Imagine these emotions in a market where there is no real ‘high’ or major long-term levels of support and resistance, a market which is still in its infancy, run 99% by speculation and expectations of future news updates. The banks and governments know this and have begun using this to their advantage, a simple announcement like the most recent scandalous claim from JP Morgan’s CEO Jamie Dimon, drove the market into an absolute frenzy and caused a meltdown of 8% within seconds of its release. Dimon claimed that ‘Bitcoin is a fraud that will blow up’ which went directly against his ulterior motives of supporting and investing in Bitcoin himself, also allowing JP Morgan clients to purchase Bitcoin directly through themselves during these accusations. A tweet was later leaked revealing JP Morgan to be one of the largest Bitcoin Note purchasers on Nasdaq’s Stockholm exchange. Due to no real legislation being present in cryptocurrencies right now, Jamie and JP Morgan got away with barely a slap on the wrists, whereas if this fraudulent activity was attempted on the Stock Market. The fines would have potentially reached the multi-millions and bans would most likely have been pressed.
As an individual with over half a decade’s experience in the cryptocurrency market, the transition we are currently seeing since the birth of Bitcoin is mesmerising and it’s incredible to believe we are at the opportunity of a lifetime where not only are we witnessing the entire internet as we once knew it develop to its next step of technological advancement, but we are also amongst the very few gaining awareness of this global shift and placing ourselves in the front-row seat to become the early adopters of what is already being implemented to change entire sectors such as computer technology, banking, voting, governments, music, gambling, shopping and even the internet itself.
Just 3 days ago now, the UK Central Bank, The Bank of England unveiled its Blockchain Data Privacy Pilot. The Central Bank announced that they have added yet another Blockchain implementation trial run to their current portfolio of crypto testing, alldedicated towards the processing of financial information. The latest being a test run working with blockchain startup Chain on a data privacy pilot, which according to the official statement release from the Central Bank, shows they have discovered breakthrough results enabling them to better monitor economies and prevent future crisis’ :
“Our work on DLT has helped us start to think through how the financial networks of the future may be able to operate in safer and more efficient ways … Our work on data analysis has thrown light on how we can manage ever larger data sets to monitor the economy and the financial system in real time and draw out patterns that might help us set better policy or spot the next crisis coming before it happens. And our work on machine learning has helped us take the first baby steps towards engaging with that data in a more interactive way, putting computers alongside our staff to help them form the judgments on which monetary and financial stability depend.”
Another key implementation that has been trialled by the Central Bank since June 2017, is the ability to dramatically improve the cross-border payments system, ideally dissociating from the method of SWIFT payments and focusing on how to bring value to clients through same-day payments with 100% transparency every step of the way. The Bank of England opted for Californian Startup Ripple to experiment instantaneous cross-border payments between Central Banks and dramatically decrease the rate of error during said payments.
The tests were successful and were reported in another official statement from the Central Bank:
‘The Ripple solution utilised by the Bank was built around the open source Interledger Protocol that enables payments to be made across different ledgers and networks across the world. A ledger is essentially a file used to record transactions measured in terms of a monetary unit of account. The solution used Ripple Connect, which acted as the interface that enables an institution’s internal systems to integrate with the Ripple network. This means that payment instructions can be sent and received, and the state of payments can be queried. The solution also utilized the ILP Validator network which coordinates the settlement of payments between the transacting ledgers, and is the source of truth regarding the success or failure of such payments. We successfully integrated the Ripple solution with two simulatedRTGS systems, hosted in the cloud, and demonstrated that we could process a successful cross-border payment across two RTGS systems simultaneously. We also demonstrated that an attempted cross-border payment that failed validation on the receiving side would not be honoured’.
Almost every other bank operating on a global basis has followed in the footsteps and each have their own Blockchain implementation alike in the process of development. Compare this with the business giants such as Microsoft, Visa, IBM and Samsung to name a few already fully underway in the development stages also, how could we possibly be in a bubble when the train has only just begun rolling?
The prices we are currently seeing cryptocurrencies reach are simply just the beginning and the result of speculation. The world is now in it’s stages of trial running Blockchain and beginning to understand the benefits within almost every sector imaginable. Now imagine yourself 5-10 years from now, when testing is done and all of these partnerships are fully merged and given the go ahead, the world as you know it has shifted how it runs to distributed, peer-to- peer technology and the cryptocurrencies you are seeing explode now are beginning to be used daily like regular fiat money would be, mainstream adoption is complete and everything runs on this underlying tech.
This is not a bubble, this is not the creation of a bubble, this is merely the beginning.