Interesting guest post by the Jincor ICO team.
Why Cryptocurrency Is Not a Bubble?
The total cryptocurrency market cap has recently surpassed $100 billion, and not everyone is convinced that what we’re seeing is a healthy growth. On April 1, 2017, the total cryptocurrency market cap was only around $25 billion, which means that we’ve seen an increase of several hundred percents in a span of a few months.
As if the rapid growth weren’t worrying enough, Chinese regulators have recently decided to issue a comprehensive ban on platforms that allow people to buy or sell virtual currency in China, which led to a massive exodus of Chinese cryptocurrency miners and a short-lived dip in the prices of most cryptocurrencies.
Understandably, many people say that cryptocurrencies are nothing but one huge bubble. Billionaire investor Howard Marks said, “[Cryptocurrencies are] an unfounded fad or perhaps even a pyramid scheme.” In fact, Bitcoin and other cryptos have been proclaimed dead over 160 times, and a new cryptocurrency obituary is published nearly every day.
To understand whether there is any merit to such accusations, we need to take a step back and explain how cryptocurrency differs from the infamous dot-com bubble and other similar periods of excessive speculation followed by a sharp crash. But before we can do that, we need to establish what a bubble is.
What Is a Bubble?
According to Investopedia, a bubble is “an economic cycle characterized by a rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices that is unwarranted by the fundamentals of the asset and is driven by exuberant market behavior. When no more investors are willing to buy at the elevated price, a massive selloff occurs, causing the bubble to deflate.”
Apart from the dot-com bubble, you may also hear cryptocurrencies being compared to tulipmania, which was a period in Holland near the turn of the 16th century and the first economic bubble. During the period, the prices of bulbs of the recently introduced tulip reached extraordinarily high levels and then dramatically collapsed in February 1637. The entire economy of Holland nearly collapsed, and countless noblemen and laymen alike lost small fortunes as they attempted to sell any tulip bulb they could for a tiny fraction its recent price.
Cryptocurrency is a Means of Transaction
Perhaps the main reason why cryptocurrencies aren’t like tulip bulbs or Beanie Babies is the fact that cryptocurrencies have utility value — they serve as a means of transaction. Hundreds of merchants, businesses, and organizations around the world already accept Bitcoin and other cryptocurrencies as an alternative payment method, including Microsoft, Overstock, Subway, Reddit, Expedia, Wikipedia, or Whole Foods, just to name a few.
Cryptocurrency payments have several crucial advantages compared to fiat currencies. First and foremost, no central party is in control, which means that your funds can’t be frozen nor taken away from you. Because cryptocurrency payments aren’t tied to any meaningful personal information, they are inherently immune to credit card data breaches. Last but not least, cryptocurrency payments are available to anyone, anywhere.
And if you want to know more in-depth details how do cryptocurrencies work, jump into reading this article.
Cryptocurrency Is a Store of Value
“With interest rates artificially low (manipulated by central banks), a normal person cannot earn even near the pace of actual inflation with any type of traditional savings account. Bonds are artificially in a bubble, stocks are artificially in a bubble, real estate is in yet another bubble, everywhere one who understands bubble dynamics looks they see a bubble. The bubble is the dollar — the world’s ‘reserve’ and ‘petro’ dollar is being drowned by central banks all over the globe, not just our own ‘FED,’” explains Nathan Martin, who writes Economic Edge.
Martin believes that more and more people are starting to see cryptocurrencies, and especially Bitcoin, as a store of value, one that cannot be controlled or manipulated by banks and governments because of its decentralized and immutable nature.
Considering that Bitcoin and many other cryptocurrencies are limited in supply, it’s highly likely that their value will continue to grow at least for as long as people use them as a store of value.
Cryptocurrency Is a Useful Technology
While tulips may be pretty, they are pretty much useless. Cryptocurrencies, and, most importantly, ideas behind them, on the other hand, have a plethora of real-world uses. Let’s look at the Etherium as an example.
Ethereum is described on its official website as “a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.” And that’s how the whole concept of smart contracts appeared and started to evolve by many others blockchain developers apart of Etherium team.
Smart contracts could help us, among many other things, secure voting, securely store healthcare records, streamline the structure of most businesses and organizations, and get rid of a large number of third-parties that currently add no value besides acting as middlemen. Etherium was the first public blockchain that allowed to build smart contracts. Alternatively, now there are many more projects in development, and each new one solves a different problem and gets better. For instance, in Jincor, we are building the blockchain that will help all kind of businesses to unleash the power of smart contracts and cryptocurrencies with no technical or legal complications. The key difference of the most smart contracts solutions on the market is that Jincor’s team is building a private blockchain, as using the public ones is a deal breaker for the most of the business owners due to the lack of security of the stored sensitive information.
While some people invest into cryptocurrencies because they see them as get-rich-quick schemes, others understand the underlying value of the technology and want to be part of the small group of initial investors who allow it to grow.
Most Grandparents Still Don’t Know What Cryptocurrency Is
During the dot-com bubble, literary everyone was buying stocks. It was impossible to take a taxi and not be asked by the taxi driver for an investment recommendation. Just take a taxi or Uber and ask the driver about Bitcoin or Ethereum or Zcash or Monero. While some will know what you’re talking about, most won’t have a clue.
And that’s good news for cryptocurrencies because it means there are still billions of people who have yet to hear about blockchain or mining.
Blogger Charles Hugh Smith says, “Bubbles occur when everyone and their sister is trading/buying into a ‘hot’ market. While a few of my global correspondents own/use the primary cryptocurrencies, and a few speculate in the pool of hundreds of lesser cryptocurrencies, I know of only one friend/relative/colleague/neighbor who owns cryptocurrency.”
So it’s not a bubble, right?
While it’s likely that we will see several mini cryptocurrency crashes due to the market’s young age, it doesn’t seem that cryptocurrencies are losing most of their value anytime soon. In fact, the potential for growth is so large that we would be surprised if most cryptocurrencies didn’t skyrocket in value over the next few years. And the proofs are in statistic data: a recent Cambridge University study estimates between 2.9 million and 5.8 million people now use cryptocurrency wallets worldwide in 2017. There are also more than 100,000 merchants, including giants like Microsoft, Paypal, DISH Network, Intuit, and Overstock, who trust bitcoin enough to accept it as a means of payment. (Tractica: Blockchain for Enterprise Applications, 2016). Cryptocurrencies are here to stay and right now is a perfect possibility for any business to secure a market share of those who prefer cryptos by accepting it as a form of the payment.
Yes, for some business owners it’s obvious that there are still some obstacles in the way of mass adoption of cryptos, such as lack of education among the general public, lack of regulatory and business compliance of cryptocurrency transactions and smart contracts, unclear legal status, technical difficulties, etc.
However, the solution is almost there. Private blockchain that has been being built by Jincor team will allow any business to unleash the power of cryptocurrencies easily with no legal, technical or operational complications in a cost-efficient manner.
Should Smart Investors Consider ICOs? Surely, in case it’s Jincor's ICO ?
One more major media mentions us! https://t.co/9cbK5BoInq
— Jincor (@jincor_ico) October 30, 2017