Not a Hot Trend Anymore – Will the Demand for Cryptocurrency Decline?

Mary Ann Callahan

Freelance Journalist at

Views 401

Not a Hot Trend Anymore – Will the Demand for Cryptocurrency Decline?

04.12.2018 04:15 am

It’s easy to look at the price action of Bitcoin and other cryptocurrencies over the course of 2018 and think that the whole thing has just blown up and the “fad” is over.

However, looking at the price alone is deceptive. A lot of the massive runup over the last half of 2017 was created by naïve retail investors jumping on what the media had painted as “the next big thing”. Many were badly burned as the same money poured out at the start of the year. Understandably, these investors need some time to heal before they start buying cryptocurrencies again.

A lot of the hype of last year was driven by wild speculation on Bitcoin alternatives. These competing cryptocurrencies all share many attributes with Bitcoin but differ in the crucial one – decentralization. The combined clout of computer systems securing the Bitcoin blockchain is considerably more powerful than any other network on the planet. This creates an unrivalled level of censorship resistance.

The price of Bitcoin has suffered a 70% drop this year and now settled at $5,300 or so at almost every exchange website. The percentage losses of some altcoins is closer to 90%.

Will the Demand for Bitcoin Decline?

As an asset, Bitcoin is truly unique. It makes an ideal form of hard money to back other currencies in much the same way gold was doing for much of the history.

Our current monetary system is outdated. We cede immense power to a handful of private companies around the world and trust them to not entirely debase our life savings. Historically, this is an anomaly. For much of the human history, gold backed the currency and societies prospered.

In living memory, we’ve already seen the disastrous effects of central banking many times. Zimbabwe, Greece, Venezuela, and Turkey are just some of the examples of countries where currencies have become entirely worthless because they are backed by nothing but trust in a central private institution.

Bitcoin offers something new. It was created almost ten years ago and launched as an experimental alternative to centrally managed currencies. As an asset, it resembles gold most. It is limited in supply, incredibly difficult to create, and is mined at a known rate. However, unlike gold, Bitcoin can be transacted globally with greater security than any legacy system can offer, at a lower price than current wire transfer services, and faster than any company could possibly manage.

Bitcoin also differs from gold in that it is not tangible. This gives it another immensely powerful property – it cannot be confiscated. As gold can be picked up and transported elsewhere, it is a constant security risk. People spend big money making sure their gold is safe, though they can do nothing to protect from governments. Bitcoin, on the other hand, can be stored by memorizing 24 words. Your wealth can travel across borders as freely as you can. No one can stop you using the network to transact value either.

For what it is best suited to achieve, there is simply no space for competitors. A global reserve currency is pointless if it is provided by two competing currencies. Bitcoin is well-positioned to continue serving as a viable option for those wishing to opt out of national economies. As more national currencies reach the end of the line and more people learn about what Bitcoin actually is, the demand can only increase.

Will the Demand for Altcoins Decline?

Altcoins, on the other hand, are an entirely different matter. Gone are the days of the hundred-million-dollar ICOs. Most tokens that have been launched since the mania grabbed hold last summer now trade below the price they debuted on exchanges at.

However, altcoins are attractive because they either propose to do what Bitcoin does but better, or they offer an entirely different value proposition. For example, there are plenty of currencies that operate public blockchains that could step up to serve as a tool for everyday payments. Projects such as Litecoin and DASH make obvious choices here. However, with advancements coming to Bitcoin, such as Lightning Network (offering both privacy and micropayment functionality), it remains to be seen if such coins will be needed in the future.

Then there are networks such as Ethereum that offer far different use cases. Building smart contracts on a global open-source supercomputer is certainly an interesting idea. Ethereum runs a number of decentralized applications that can be used to facilitate various industries and bring more freedom to consumers.

All that said, it’s unlikely that full cryptocurrency mania is over. It’s highly probable that many useful altcoins will see the kind of epic gains like those observed in 2017. However, in the best-case scenario, this bull run will be triggered not by the fear of missing out, but the clear understanding of how this tokens might help in building a new decentralized future we were promised long ago. 

Latest blogs

David Moss Avi Networks

Maintaining Trust While Navigating through a Multi-Cloud World

Financial services companies are extending data centres with private and public clouds to keep up with demand, but does a multi-cloud environment introduce too much complexity and risk? Read more »

Philippe Martineau OSTP Alliance

Travelers to consumers: Reflecting on this year’s Transport Ticketing Global

With the world’s largest public transport gathering, Transport Ticketing Global, over for another year and our feet firmly in 2019, it seems apt to reflect on the changing global vision set at this year’s event for the future of public transport. Or Read more »

Kyle Ferguson Fraedom

Why banks need to get personal for a piece of the SME pie

The SME market, for the majority of banks, is becoming a key target sector. In the UK, according to the Federation of Small Businesses (FSB), small businesses accounted for 99.3% of all private sector businesses at the start of 2017 and 99.9% were Read more »

David Worthington Rambus

Real-Time Payments and The Growing Obsolescence of Cash

According to the World Payments Report, compiled by Capgemini and BNP Paribas, the global volumes of non-cash transaction volumes grew by 10.1%, reaching 482.6 billion between 2015 and 2016. In addition, McKinsey’s recent Global Payments 2018 report Read more »

Gerald Beuchelt LogMeIn

How banks and financial institutions can step up enterprise security

Cyber-attacks are increasing at an alarming rate, and in 2018 we’ve witnessed breaches hit several trusted brands across various industries, including British Airways, Ticketmaster, and most recently, Facebook. Read more »

Related Blogs

Chris Principe Financial IT

Crypto-Crypt or Gold Mine?

As you probably remember, Bitcoin was the big news headlines and the dinner table talk of a year ago. As crypto-currencies soared in value, it was rightly the dominant topic of conversation. Crypto-currencies had advanced in value quite dramatically Read more »

Financial IT Financial IT

Top 12 Crypto Startups to Watch in 2019

Looking forward from December 2018, one can see three reasons why the coming year will be a key one for crypto-currency companies. If nothing else, the year will mark the 10th anniversary since the birth of crypto-currency, with the introduction of Read more »

Mary Ann Callahan

The Prospects for DASH – Time to Skyrocket?

Last year, the cryptocurrency market exploded in a way that we had never seen before. Prices were rising for almost every coin and the industry was front page news all across the world. More people got into cryptocurrency in the last year or so than Read more »

Henry Benjamin Skycoin

Why the Future of Cryptocurrency isn't Bitcoin

The world was introduced to cryptocurrencies with Bitcoin, and at present, it is still the de facto cryptocurrency on the market. The thing is, the future of cryptocurrency doesn't lie with BTC. The majority of things that are first to market always Read more »

Mary Ann Callahan

Bitcoin Alternatives — Which Cryptocurrencies Are Available and What for?

Bitcoin may be the talk of the moment, but did you realize that Bitcoin is simply a tip of an iceberg as far as cryptocurrencies are involved? The huge achievement of Bitcoin has evoked the advancement of numerous cryptocurrencies, and which are Read more »

Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App