The Cryptocurrency Bubble Is Popped
Since the start of 2017, cryptocurrency had a remarkable run. That was, until January of 2018.
As good a year as 2017 was for the alternative monetary system, 2018 is equally as bad. Thus far, the market gave back all of the gains made in the serious run up last year.
Looking from the all-time highs, Ripple is down 89%, Ethereum rings in at 76%, and Bitcoin at 67%. Many of the other alt-coins fared much worse.
When we look at the charts and see it graphically, the point is driven home.
Many millions were made by the run up in the cryptocurrency prices. Those who got in early, and sold, ended up making a fortune. This is what usually happens with bubbles. Now people are questioning whether this entire segment will bounce back.
At the core of a lot of this is the mining costs. Ethereum has dropped to the point where it is no longer economical to mine. When the cost of hardware is factored in, miners are taking a loss on each coin generated. Some will claim that miners will keep mining because they believe the price will go back up. Maybe this will be the case. Still others say that the algorithm could be changed to make it easier to mine. Will that have the desired results?
The leads to the bigger question of the market leader: Bitcoin. Is it going to see a point where mining is not profitable? Some believe that it is impossible for that to happen. The price of Bitcoin cannot go below the mining costs. Then why did it happen to Ethereum?
There is a lot of uncertainty among these coins. The global consumption of electricity to generate these tokens is growing astronomically. If the profit potential is removed, will they continue to do it?
We also see many Bitcoin advocates promoting the idea of the Lightning Network. This is a total unknown. It might end up being the nirvana these seek but it is too early to tell. This is a grand experiment (all of cryptocurrency is really).
Where does the market go from here? That is the question everyone is asking.
Here is more on this subject.
The 2017 run up was purely speculation based (had no real ties to development, use-cases, active users...), any future run ups in the crypto space will likely be quite different then the 2017 one and will require actual advances in development, actual real-world use cases, and actual increases in daily active users to cement the validity of each coin beyond purely speculation.
Basically I don't think the cryto space is dead in any sense of the word but actual valid uses will be needed before the space will be able to explode upwards again like it has in the past.
Agreed. And given the recent news of Wall Street and other global financial institutions positioning themselves to enter the market... it's difficult to imagine they'll invest in the space yet not leverage the technology for themselves.
"...Bitcoin. Is it going to see a point where mining is not profitable? Some believe that it is impossible for that to happen. The price of Bitcoin cannot go below the mining costs. "
Whoever says ^ is a NUTCASE.
As in, hypothetically lets say a rich nutcase, goes all in buying mining gear driving the price to mine 1 BTC at $10K. Just because the small percentage of coins mined from then on cost $10k doesn't mean the 16M odd coins already in existence should each now be worth $10k.
Theory says miners will be switched off and cost of mining decreases until equilibrium is reached....BUT in the crypto/BTC space, theories rarely hold - a lot of crazy things go on when a handful of whales can easily manipulate thousands of naive people who have dollar signs in their eyes.
I am hoping to see a annual fall bitcoin pump this year November-December on schedule.
the Ethereum and bitcoin and ripple curves are different, ripple looks like it is headed to zero whereas the others have retained much of their value.
"...November-December on schedule."
-> seems that's becoming a bit of a self-fulfilling prophecy: everyone knows its happened before, thinks it'll happen again, so buys in. Then everyone else buys in until peeps go 'hang on, why's the price increasing???
Then the selling starts and we wait until the next November for the fun to start again.
Does crypto have any purpose other than the November-December pump?
I LOVE it. 😆😆
Think about how much people would freak out if the bear market went through December. They'd be crying armageddon in the streets!
Eeeeek... it would definitely break the 'mould' and everybody's belief that there is a known regular cycle with BTC.
I'm of the opinion there will be no bull run this Nov-Dec. A tide has turned IMO.
Only a few months away in any case... watch this space as they say.
Thanks
I hope not, I will start the power down in November!
i agree
What gives me some hope, is when you look at Bitcoin's long term chart, after it hit $1,000 for the first time, it then sank to around the $2-400 range for a few years, before going on the run we are all now familiar with.
I hope this is a similar situation. If so, it's a great time to keep accumulating while large financial institutions (NYSE/ICE, etc) get in and developers are doing the work of making it more of a mainstream currency.
I liked your post. We know a lot about bubbles. We've seen them, we have a good understanding of what they do. The reality is, it's still early. Volatility is the norm and is desirable. As various crypto currencies take hold...we'll still see winners and losers...the main thing is when you recognize that bubble...either sell high, or hold...
There is nothing stopping the price of bitcoin from dropping below the price of mining.
Agree
@finprep the is the question in my mind too but I think this opportunity for people who miss the train last year I believe by end of this year we will see same out comes again or maybe even higher than that what do you think?
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Bubble is good in the sense that it gives the market chance of breath and reset the whole market again. This trend is exactly what happened during .com and earlier stage off modern stock market. Sure some will suffer during the bubble but when it rise again, it will better than ever.