This year is coming to an end and has been full of surprises, not least for cryptocurrencies. Many thought that after the crypto boom in 2017, the market would continue but it has fallen during 2018 to levels no one thought possible. However, after rain comes sunshine.

What happens after a recession?

Our history is a good teacher when trying to anticipate what could happen in the future. Cryptocurrencies are not the only asset class that has gone through recessions. In 1929, the stock market went into a great depression. Billions of dollars were lost in a single trading day, and after a period of wild speculation the market reached its peak and collapsed. The companies and stocks were heavily overvalued. By 1932, the market only consisted of 20 per cent of the original value. What happened after? The market rose from 40 points to today’s value of over 20,000 points.

About 19 years ago, the Nasdaq 100 had gone up over 500% during a five year period, which created a bubble, the dot-com bubble. The market exploded because of the anticipation of the internet. When it eventually burst, it washed out billions from the market. However, the fundamentals became stronger, and the “fake” companies disappeared while the real companies grew and are today the most powerful companies in the world — companies such as Google, Facebook and Amazon.

Many bubbles and recessions such as John Law’s Mississippi scheme, the 1925 Florida land boom, metals in the 1970s, biotech in the 1980s, and real estate stocks in the 2000s, saw investors losing an ample amount of money. However, as long as the underlying assets of every bubble grow, it eventually exceeds the levels at which they had burst.

What will happen after the crypto recession?

During 2018, it was the bubble of cryptocurrencies that popped. Generally, after a bubble pops, it does not come back to life. However, in the financial world, it has happened more than once.

Just as the dot-com built the hype around the internet, investors built the hype with cryptocurrencies around blockchain. During 2017, people invested billions of dollars around the fantasy that blockchain startups would make them rich. During one point, the market was worth $800 billion only to fall to $100 billion during 2018.

Why do financial markets come back to life? It is only because of the companies that understand the pulse of consumers and keep innovating their products. While the ones that didn’t innovate, or oversold their ambitions against the limited application of their ideas, ate dust. It is the same story with cryptocurrencies.

The prices might be down, but many projects in the crypto space are building the fundamentals and have real-world use-cases. Bitcoin that many sees as “digital gold” and a store of value, is the most famous cryptocurrency. Ethereum, the supercomputer that will release the upgrade Constantinople during 2019, could prove to be a valuable platform for decentralised applications. Those are not the only two. Other projects such as IOTA, XLM, XRP and VeChain are all building real-world blockchain solutions and entering partnerships with world-leading companies. For example, XLM is working closely with IBM.

Even though the price has fallen during 2018 much has happened in the crypto world. The number of crypto users has gone from 17 to 35 million users, and the number of crypto jobs more than doubled during the first quarter of 2018. Institutional players, such as Nasdaq among others, will enter the market in 2019.

What happens after a great crypto depression? Well, the market doesn’t repeat its mistakes and recovers more organically than before. Only, it could take more time to regain its former glory, and a few projects will succeed while the majority will not. However, we will see new Google and Facebook come forth from this new asset class.

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