The Dynamic Landscape of Cryptocurrencies

Overview

        The unique properties and fundamentals of exchanging cryptocurrencies provide a great potential upside for daring investors. The capability to transition value from one coin to another quickly, at any time, for a cheap fee has significant consequences to the overall market structure. Where 100 years ago, traders had to physically attend a market to buy or sell commodities, we are now able to make a large number of transactions from anywhere with an internet connection. This speed of transaction and access for large numbers of people determines where the wealth moves and how long it stays there for. There are numerous reasons to buy, sell, and exchange cryptocurrencies, many of which are reflected in the price, volume, and market caps of these currencies.

New Coins and Scattering Effect

        For the entirety of bitcoin’s lifespan, it has had less competition than it does today. Where now there are thousands of coins being traded for money, before 2015-2016 there were few competitors to speak of. The introduction of ICOs and expansion of blockchain technologies in the tech savvy consciousness has made available more investment options. As a result we are seeing bitcoin’s market dominance by % decrease, particularly since beginning last year (2017). As more wealth is stored in cryptocurrency, there are more options for safe storage and payment allowing for new and creative projects to take the forefront. Research, time, and experience all move value into new projects which investors and speculators hope will bring returns in monetary gain or technological value. The resulting scattering effect appears similar to a wave, rhythmically moving value between main coins and alt coins until real competitors are established and the rest are washed away. This motion provides some insight into the mindset of investors and overall market sentiments.

Market Cap and New Entry

        The explosion of new market capitalization in 2017 brings with it several questions as to where this money will eventually be focused. Before bitcoin became a viable speculative asset, many of its users were genuinely interested in the technology for its own utility value. As more platforms and security measures have been built on top of the core structure, space has opened up for investors with little to no technical knowledge to step in and move markets. The more attention, interest, and capital that shifts into these markets, the more we are seeing new types of investors appear. These investors are often less interested in the original vision of the coin and more focused on new projects and potential returns. As a result we are seeing many coins build steam which are direct competitors and sometimes in opposition to bitcoin’s vision of decentralization.

Spendable Cryptos?

        Cryptocurrency at the moment is in a phase where far more people are transferring value into the markets than out. Many investors are longterm HODLers interested in riding their coins as far as they can go and to their own ends. From my perspective, there are relatively few people using these coins for purchases, especially given the tax implications and fear of missing out of potential future gains. This lack of mainstream spending adoption is creating a bottleneck where value is entering the space at a greater rate than it is leaving. Eventually, when adoption is more accessible and the markets have settled to a more stable price, it is likely that the idea of cryptocurrencies will take a new stage and become something completely different from how we now perceive it. As tax implications become better understood, more users will find spending their coins to be a manageable option.

Staying Power from Intrinsic Value

        While many of these coins are gaining in value and reporting regular daily or weekly returns, it won’t always be this way. Eventually many of these coins will get sold off as a result of possible economic downturn, over-inflation of fiat currencies, or any number of other potential reasons. In these bearish moments there is a tendencies for some coins to hold their value better than others, given a large confluence of factors. Coins which represent safer longterm investments such as visionary companies and historic early coins tend to retain their value in comparison to more speculative coins which investors care less about. In choosing which coins to purchase and hold, it seems wise to take into consideration whether their value is derived primarily from speculation and other’s perceptions in the short term, or as investments into more stable longterm coins. The coins that represent the safest investments tend to be those that have the greatest intrinsic value as a result of their functionality, novel usage, and cultural history.

Forecasting

        As many cryptocurrency investors have already discovered, lots of market players are operating under gameplans and strategies, often many steps ahead of the rest of us. Economic as well as perceptual factors are at play in forecasting possible short term results of various coins. These considerations come into play for most if not all serious investors (and gamblers). It is not clear which strategies are the best or most profitable so far, however many people are actively pursuing this line of research and sharing their findings on various media sites. Each of us has to ultimately decide how we want to play the game and what we are after to avoid the mistake of getting caught pants down. Concrete decisions and price goals are effective tools in determining which plan of action will result in minimization of risk and maximization of gain. Surverying the market sentiment through research and observing price action through charts is an excellent way to approach this.

Changeable Future

       In a very short amount of time, this game of wild speculation and profitable results has come about. Finding new and useful strategies for today might ultimately be useless in a regularly changing  landscape. It will likely not always be so wild and unpredictable as more experienced investors enter the markets, however experience gained now is likely to be of great value in the future. Understanding many of the factors which determine how these markets are shaped and what moves them day to day is a skill that can ultimately lead to success.