From Riches to Rags: Have Cryptocurrencies Crashed for Good?
Last year, cryptocurrencies made headlines as their value continued to rocket up, reaching a high of around $20000 in December. Bitcoin has recently drifted from the public spotlight, but not before its value crashed drastically in the space of a few months at the start of 2018.
During the rallies of 2017, the popularity of cryptocurrencies meant that they started to have an effect on real economies. Many companies with publicly traded stocks made decisions that showed that they stood to benefit from cryptocurrencies. Markets, in turn, rewarded them for this.
For example, Bloomberg reports that Longfin Corp witnessed a stock rally of over 2,000% in a week after announcing it had purchased a "blockchain-empowered global micro-lending solutions provider." As this rally spread from bitcoin to other cryptocurrencies, and as companies such as Longfin Corp touted their links to them while bidding for resources in the real economy, it’s evident that cryptocurrencies started to have an economic impact in the real world.
However, for such a powerful, potentially disruptive innovation, bitcoin’s downfall (and that of other popular cryptocurrencies like ethereum) in terms of value was even swifter than its ascension. With bitcoin now hovering around a value of $6000, could this be the end of cryptocurrencies? Here are some considerations.
Towards the end of 2017, articles emerged about how one bitcoin would one day reach a value of $1 million. This seems like a distant dream now, but it does show how much hype there was surrounding cryptocurrencies at the time. It was this same hype which fuelled speculation, and caused novice investors across the world to pile their money into cryptocurrencies in the hopes of making their fortune.
This led to a huge bitcoin bubble, which propelled cryptocurrencies well beyond a stable value, and eventually led to the infamous crash. Now that their value has plummeted, and the hype has died down, it is difficult to see how cryptocurrencies could recover.
Part of the reason cryptocurrencies ballooned in value in the first place was because of their deregulated, decentralised nature. This means that their value is governed solely by supply and demand, making them incredibly volatile. Any hint of regulation, as was the case when China banned ICOs, was sure to adversely affect their value by denting investor confidence.
ICOs were a popular, new fundraising model used by some startups across the world, which allowed them to issue investors bitcoin as shares or ‘tokens’ of their business in exchange for funding. With China having a significant market for bitcoin, this almost certainly helped to bring about cryptocurrency’s downfall (as did regulation in other countries).
Is Cryptocurrency Dead?
Craig Erlam, a Senior Market Analyst at Oanda, was asked if we are watching the great crypto funeral, and had this to say:
“I don’t think we’re seeing a crypto funeral, more so the consequences of a late-2017 rally that was built on little more than hype and the hope of easy profits. We have to remember that even at the current levels – around $6,000 – the price of bitcoin is up more than 500% from the start of last year, which is hardly a bad return.”
This certainly seems to ring true, and it is still worth remembering that, at its inception, bitcoin was barely worth a few cents. As such, many investors will likely be evaluating the future potential of cryptocurrencies.
If one thing has become clear with cryptocurrencies in the last few years, it’s that their future is shrouded in uncertainty. Conversely, it is clear that cryptocurrencies have made their mark on the world stage, and the revolutionary technology which underpins cryptocurrencies, blockchain, already has its own market set to be worth $12.48 billion by 2025.
It could well be the case that, despite the huge (burst) bubble, cryptocurrency’s journey is only just beginning. If more businesses across the world accept it as payment, and fears about regulation subside, then it has every chance to once again rise to the top as an investment choice.
With cryptocurrencies having the potential to be such a major disruptive force in the world of economics and politics, it may seem surprising that many central banks around the world, such as Sweden’s Riksbank, have considered creating their own digital currencies. This would help them to stay afloat in a world which relies less and less on physical cash, and could be a necessity in the future.
If cryptocurrencies were to be widely adopted as legitimate means of payment around the world, then the current global financial system would almost certainly change in the years to come. Since most central banks issue mainly banknotes and coins to the public, the issuing of digital cryptocurrencies instead would mark a significant change in monetary policy, although no one would realistically be able to predict what the long term economic effects of this may be. Even the fact that central banks are debating the adoption of cryptocurrencies, though, is noteworthy.
Despite the misfortune of cryptocurrencies at the end of 2017, they do not appear to be dying. If anything, the bubble has shown just how much potential they have to become both valuable and useful in the near future. As such, it may be a good idea to keep an eye on their value in the coming years.
- Is this the beginning of the end for Bitcoin?
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
5-year economic forecasts for 127 countries & 30 commodities.
Date: July 26, 2018
TagsUnemployment rate Australia Eurozone Brexit Commodities Greece Healthcare Banking Sector Cryptocurrency Bitcoin Argentina South Africa Japan Exchange Rate Italy Tunisia Nordic Economies Latin America China Company News Vietnam Iran Base Metals Commodities Portugal Forex Infographic oil prices United States European Union Mexico Oil MENA precious metals Consensus Forecast Precious Metals Commodities TPP USA Sub-Saharan Africa G7 OPEC Trade France Canada India Germany Brazil Economic Growth (GDP) Investment Venezuela Euro Area Inflation Gold Africa Agricultural Commodities IMF Housing Market Colombia Energy Commodities Turkey United Kingdom Spain Major Economies Ukraine UK Emerging Markets Eastern Europe Russia Asia
Panama's economy is set to regain momentum this year on the back of the ramp-up in production at the Cobre Panama m… https://t.co/1VSuAjWx9r
1 hour ago
Measures underway to improve Colombia's fiscal account will likely restrain the pace of expansion in 2019. Read mor… https://t.co/iCfPnVCrmE
17 hours ago
Venezuela's economy is seen contracting 10.3% in 2019, which is down 1.9 percentage points from last month's foreca… https://t.co/lkB8zhWaHY
19 hours ago
Precious metal prices are seen rising 6.1% in Q4 2019 compared to the same period of 2018 (previous month: +4.8% ye… https://t.co/42pkJS5aeo
22 hours ago
Dominican GDP is seen growing 5.1% in 2019, which is up 0.1 percentage points from last month's forecast. Find out… https://t.co/AQay04xqi3
1 day ago
- Brexit Scenarios: Consensus of 14 Economic Analysts
- Sweden just formed a new government and approved its 2019 budget: what does it mean for the economy?
- Which countries have the highest public debt levels?
- Predictions for the global economy in 2019 from 13 experts
- Gurdgiev: Predictions for the global economy in 2019
- Daniel Lacalle's ideas for 2019: Change of cycle.
- Vietnam Poised to Profit from Free Trade Agreement Opportunities
- Canada in 2019: Interview with a Top Economic Forecaster
- Pound Sterling 2019 Exchange Rate: Projections from Leading Analysts
- Expectations for Latin America’s Economy in 2019
- Ethiopia and Rwanda: From Destruction to Development
- Key commodities trends to look out for in 2019
- What drove Gulf neighbors to bail out Bahrain?
- The Four Financial Bubbles and Their Impact on the U.S. Economy
- The Poorest Countries in the World
- Italy: The sick man of Europe
- What does Bolsonaro's presidential win mean for Brazil's economic outlook?
- The World's Top 10 Largest Economies
- In Latin America, taxpayers are tapped to shoulder the burden of a bank bailout
- How and when will the next financial crisis happen? - 26 experts weigh in
- China and Africa: A partnership under the spotlight
- The conditions are ripe for a Global Financial Crisis 2.0
- Uncertainty, instability and fear haunt a generation of Argentinians
- 5 things: What to expect for Mexico's economy in 2019
- 5 things: Brazil's economic downturn and what to expect going forward
- Emerging Market Currency Crisis: Everything you need to know
- Which ASEAN countries are most exposed in the event of a U.S.-China trade war?
- 75 Top Economics Influencers to Follow
- Emerging Markets Economic Outlook 2018 and 2019
- The Faces Behind Latin America’s Key Institutions
- 2019 Economic Outlook for the Top Oil Producing Countries
- Is your cup of coffee about to get more expensive going in to 2019?
- The Economic Implications of an Aging Global Population
- Can the Wisdom of the Crowds predict the results of the 2018 World Cup?
- Railway Mania: The Largest Speculative Bubble You’ve Never Heard Of
- From Riches to Rags: Have Cryptocurrencies Crashed for Good?
- Investment looks to Latin America, but forecasts are not encouraging
- Turkey: Erdogan has cemented his grip on power - now what about the economy?
- How can Latin America’s business environment benefit from technological change?
- Mexico: A look at the past, present and future as elections yield AMLO victory
- Italy’s New Populist Government and the Eurozone: Prelude to a Crisis?
- Latin America moves toward increased integration as U.S. protectionism grows
- How can Latin America increase productivity without affecting the quality of employment?
- How will Saudi Arabia's economy benefit from lifting the women's driving ban?
- Which countries are the most prepared for the upcoming digital revolution?
- India Under Pressure from the U.S. on Trade Policy
- The Story of Steel
- Latin America is the World Leader in eCommerce Growth Despite Serious Challenges
- What the TPP means for trade in Latin America
- Elections in Russia: Analysis and Implications
- Nearly a Third of Latin Americans Have No Right to a Pension
- A Look at Healthcare Models Around the World
- Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
- The Economic Effects of Trade Protectionism
- Regional Disparity: The Dark Side of Inequality in Latin America
- Coal: The story of the world's most abundant fossil fuel
- Gold: The Most Precious of Metals (Part 3)
- Venezuela's Electoral Conundrum
- Trump's 1st Year: 95 Analysts Surveyed on U.S. Economy
- The Latest on China and What's in Store for 2018
- An in-depth look at the Eurozone’s booming economy and the challenges that lurk in the shadows
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- What will be the most miserable economies in 2018?
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Bounty or burden? The impact of refugees on European economies is far from clear
- Are Central Banks Nationalising the Economy?
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- How will emerging market economies perform in 2017?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- FocusEconomics Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 100-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Russian economy update in wake of OPEC deal announcement
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- FocusEconomics partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit