Cointelegraph ran a recent article explaining why the combined value of Cryptocurrencies will surpass the $1 trillion USD mark in 2018.
Whilst the language of the above-referenced article was perhaps somewhat inflated, there is some underlying fundamentals to the Cryptocurrency phenomenon that may mean that the claim is not quite the exaggeration that its tone insinuates. Our own feeling is that we are looking at late 2018 at the earliest, but more likely sometime in 2019.
However, there are, of course, no certainties in life but, if Cryptos are to enter into the league of trillions, it will be on the back of three core drivers which all need to collaborate for us to get there:
- Mass adoption
- Institutional Investors
We will discuss these in turn.
Firstly, Cryptocurrencies will undergo mass adoption. However, Cryptocurrencies will likely not undergo mass adoption for their currency aspect. They will, on the other hand, do so because there is now emerging a vast number of new products and services leveraging Blockchain technology that are underwritten by tokens which will be required to access these same products and services.
And you may just find that people will very often be consuming these products and services by means of payment in traditional fiat without realising that those same payments are performing actions on the back-end to convert those fiat payments into token acquisitions that will allow for delivery of those products and services which leverage the Blockchain.
This, of course, is simply because the vast majority of Blockchain solutions now coming to market are being driven by the ICO phenomenon. Whilst most ICOs, being simply either opportunistic Ether grabs or weak propositions, will make for miserable failures, there are nonetheless literally dozens of solid propositions – and we have seen some of the early prototypes – that will be coming to market with revolutionary products.
By this time next year, these products will have been fully developed and some of these will be undergo successful mass adoption. That will represent the first major boon to combined market capitalisation of the crypto economy.
Traditional financial services – from corporate finance through to pension fund management – are beginning for the first time to see en masse past the Bitcoin-mania that has, quite frankly, been tarnishing the concept of cryptocurrencies.
As anyone who has been following developments in this field should know, this is no longer about Bitcoin itself, this is about the Blockchain, Bitcoin’s real gift to the world. Whilst Bitcoin may continue to rise, it is purely doing so because it is largely being purchased for the sake of being purchased. It therefore might crash. But whether it does or not, the Blockchain concept is here to stay.
The Blockchain concept has now triggered a frenzied run of new ideas for products and services that require funding. This, of course, has been the driving force behind the ICO phenomenon. And institutional retailers are looking at what are a growing number of serious Blockchain-based business models that have the potential to knock out serious returns on their initial investments. And they want a piece of the pie.
The current, inherent volatility of the crypto space is holding them back however. What has been happening, then, is that many from within this space are abandoning their roles within traditional finance to create start-ups that are seeking to migrate the traditional mutual fund model, amongst others, into the Crypto-land. Astronaut is the archetypal example here, and the numbers of these kinds of examples will simply grow in the future.
However, it is when the SEC begins to give sign-off to ICOs – which it likely will do at a point in the not-so-distant future by introducing new or adapting existing legislation to the ICO phenomenon -that we will then see the current timorousness of traditional finance metamorphosing into the Crypto-insatiable beast that it will become. And the knock-on effects will be huge – and welcome – for early adopters especially.
Here, we are simply referring to governments and their current attitudes to the Crypto phenomenon. There is always the risk, of course, that governments will collaborate to impose a blanket ban on cryptocurrencies although we consider this unlikely – if only because, from a practical point of view, it will be difficult to enforce.
The real risk is if governments collaborate to introduce a whitelist of approved cryptocurrencies. That will, in and of itself, send all others crashing – this will could only apply, however, to cryptos which serve purely as a currency. Blockchain-issued tokens will weather this kind of attack but they are underwritten by something that pure cryptocurrencies – and even the US dollar bill for that matter – do not have: functional value.
We are all set, then, for the Trillion Dollar Journey. And when we get there, governments will naturally feel obliged to step in. And when they do – and do so in a reasonable manner – Crypto-techologies will likely define the remainder of the first half of the twenty-first century.
With it, the Blockchain’s inherent predisposition to creating wealth and decentralising and democratising processes should mean that we all get to benefit in some way.
We suspect, however, that those who climb aboard early will be the biggest beneficiaries.