Cryptocurrency Investing in 2018

It was December 2017, for long-term investors in the cryptocurrency space, this was an exciting month of market growth. That’s an understatement. It was pure euphoria. Everyone was talking about cryptocurrency during this time and everyone wanted their fair share of the newly claimed, “transfer of wealth”.

On January 8th, 2018 everything changed…

Source: CoinMarketCap

Self-proclaimed “crypto experts” were all speculating that this was a much needed “correction,” while others said, “this dip happens every year in January, there is nothing to worry about, keep HODLing” The reality of what was happening was the beginning of a steady decline in cryptocurrency market valuation. A decline in which we are still experiencing at the beginning of Q2 2018.

The cryptocurrency market cap had peaked at around $825B in valuation before it’s steep decline occurred. At the time, market trading volume was at an all-time-high of $44B, an insane sight when considering that the total market cap was valued at a mere $7.2B in value and the market trading volume was only $50M on the same date back in 2016.

2017 Was Crypto’s “Renaissance” Phase

The spark that ignited the global fire that has become known as cryptocurrency mania all started with the creation of a digital gold-like currency known as Bitcoin. Bitcoin was making a name for itself ever since the text, “Bitcoin: A Peer-to-Peer Electronic Cash System” arrived on the Bitcoin.org website in the form of a whitepaper back on October 31, 2008. The first Bitcoin transaction was sent by Satoshi Nakamoto on January 12, 2009, and the rest is history…

So how did a mysterious programmer with a goal of turning money into a digital private form of currency, which in turn, eliminates the use of private banking systems, create a nearly trillion dollar industry in just 10 years?

The answer to that question is: Blockchain.

“The one thing that’s missing from the internet, but that will soon be developed, is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B, without A knowing B or B knowing A.” — Milton Friedman, Economist

That’s exactly what Bitcoin set out to do and accomplished. Bitcoin is a form of currency that operates off a publicly managed ledger network known as the blockchain. This allows anyone to send Bitcoin to another person in the world digitally without any third-party intervening. The only problem Bitcoin faces are scalability and transactional fees associated with mining blocks of the blockchain. These issues sparked a renaissance of innovation to which we now have thousands of different cryptocurrencies that we know commonly as “Altcoins”.

Altcoins Made it Happen for Cryptocurrency

With the further developments of blockchain technology, we now have newer altcoins and blockchain systems in place such as the second most popular cryptocurrency, Ethereum. Ethereum is popular due to their invention of “smart contracts”, which enables contractual agreements to take place over a verifiable blockchain network as well as their allowance of Token creation on their network. Ethereum rightfully receives an appropriate appraisal for the ERC-20 token program that has allowed thousands of developer teams to build their very own cryptocurrency. This is one of the reasons we believe that cryptocurrency had such a prolific growth period during 2017. Cryptocurrency became less of a nerd’s hobbyist way of fighting off evil bankers and dictatorial governments. Cryptocurrency was starting to have applicable use-cases behind them. This is how we started with a digital currency that was perceived as valueless, to a near-trillion dollar industry that became real and powerful.

You may be asking yourself… “If cryptocurrency is so valuable why did the market just crash”

Well to answer this question we have to look at why the market crashed and not just analyze the charts. Cryptocurrency’s value works similar to the publicly verifiable blockchain. If someone sends someone one Bitcoin to another person, it’s recorded on the ledger for the public to see. Well, cryptocurrency startups work essentially the same way, if there is no proof-of-work or valued use-case for a cryptocurrency, it shouldn’t be worth anything.

Perceived value is everything in regards to currency. It’s what makes the fiat money you keep in your wallet valuable when the reality is your wallet/purse is filled with paper and plastic cards.

When Cryptocurrency took off in 2017, projects that were started as a humorous joke turned into valuable assets that people were investing millions into. Underwhelming projects that had no clear visions of successful implementation of adoption or use-case were being invested in based on the odd chance it could increase the value of an investor’s portfolio.

Investors were only getting involved in cryptocurrency just because the rising values were making them all artificially rich, but fundamentally ignorant. Everyone that expected the market to keep growing was blinded by the vision of reaching overnight financial freedom. Simply put, investors became greedy.

2018 Will Be Different for Cryptocurrency

Source: Reuters

The wounds of Q1 2018 are still healing and re-opening as of this publication. However, 2018 will be a fundamentally different time for cryptocurrency’s adoption. This year will be the “put up or shut up” phase of cryptocurrency development. Further regulation and legislation will enter this space within the next few years and with it will bring institutional investors on board of the many promising projects that are being offered. One could compare this with the pets.com of the .com boom. We will see numerous projects die off and become worthless but we will also find established projects become wildly successful in the near future.

“Bitcoin will be the world’s sole currency in ten years” — Jack Dorsey, CEO of Twitter

There are already signs of this nature in recent news. Billionaire Jack Dorsey, the CEO of Twitter and Square has invested $2.5M into a Bitcoin-related project known as the Bitcoin Lightning Network that hopes to help Bitcoin combat the issues of scalability and bringing down the cost and wait time of transactions. Institutional investors such as George Soros & Venrock Ventures are now changing their stances on digital currencies and are using their venture capital groups to invest in cryptocurrency startups.

This is an early sign of what’s to come. While the market is down, this is the time to be accumulating your assets, this is the time you should be educating yourself on cryptocurrency and blockchain technologies as much as you possibly can. With regulation coming to the exchanges and with newly-educated investors looking for legitimate projects to invest in, we will see a new wave of enthusiasm towards cryptocurrency. Only this time, when you start to hear about it in the headlines it will be too late.

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