In the past seven days the crypto market has lost 50 billion dollars in value. The total market cap fell from 200 billion to just below 150 billion dollars. The biggest eye-catcher was of course the value of bitcoin, which dropped from $6500 all the way to $4100, only to recover a bit to a level around $4500. Why is all this happening? One of the reasons has to be the lack of utility and results in the crypto space. Let me explain this.
Bitcoin, Bitcoin Cash, Monero, Dash, are all coins that are pitched as store of value or as payment methods. That’s awesome of course, but ever since these coins gained traction among household investors they didn’t achieve that much on the commerce side of things. We still can’t use crypto on Amazon or Ebay, and digital payment methods on smaller eshops are very, very limited.
At the same time the only utility we have for crypto in our every day life, is that one coffee place around the corner that accepts bitcoin. Or maybe that tobacco store that is looking for a way to get more customers as its market is declining. Major retail brands like Carrefour, Walmart, Media Markt or Albert Heijn (depending on which country you’re based), still don’t want anything to do with crypto.
On top of that, the cryptocurrency space has been build on lots of promises. We’ll be able to track the production of our food on the blockchain, our car registrations will be on the blockchain, even our very own identification papers are destined for a crypto network. But these things, processes and institutions don’t change over night. Technology needs to be developed, tested and implemented. Implementation happens in steps, baby steps.
Having the European Union develop a new system for passports takes years. So you can imagine that moving the entire identification system to a blockchain network is not something that will happen within a year.
At the same time there were many, many Initial-Coin Offerings (ICOs) that are simple scams to acquire more crypto coins. Some of those projects straight up want to rob you from your money, while others have good ideas but not the skills to even develop a working product.
Bitcoin peaked in December 2017 at 19 thousand dollars, after which it dropped and climbed back to 17 thousand dollars on January 17th. From that point bitcoin and the entire market got into a downfall. What exactly triggered this downfall is hard to determine, but most likely it’s about people cashing out. The price keeps falling, more people are cashing out.
At the same time on the trading market, bear traders try to grow their hands. Buying coins as cheaply as possible, and trying to sell it with a profit a bit later. The investors that decided to HODL, which means they hold on to a coin until the bitter end, ended up on the wrong end of the spectrum and they lost out on a lot of money.
The exact reason why bitcoin fell from $6500 to $4100 in November, is still a bit of a mystery. It’s difficult to pinpoint to exact problem. But people are only selling their coins, when a product is not behaving the way they would like to see. The price has not been moving up since September. Every effort from bitcoin to move upwards, has been met with resistance. In May, August and September, there were small bull runs, but without success and without the power to defeat the bears that want to keep the price down and sell off as soon as they made some profit.
In the end all these cryptocurrency project lack utility. We can’t spend our bitcoin in the supermarket. Placing an anonymous order on Amazon using Monero is out of the question, while Ripple is only being used by a fraction of the banking world. And yes, you may question whether XRP is even used at all. At the same time Ethereum’s decentralized apps are quite useless, and only used by a couple of hundred people per day.
For all this talk about blockchain technology and the strength of this technology, there’s still very little utility in our every day life. We can spend our coins to buy a staking box, hardware wallet or mining rig, but spending these crypto coins on a birthday present for your children is almost impossible. Unless you’re child like mining hardware. 😉
Will the market recover from this fall in value? Yes, it will. It will take a couple more years for blockchain technology to be incorporated in commercial enterprises, retail and government institutions. At the same time cryptocurrency needs to get more foothold in commerce, and retailers need to embrace this new money.
Obviously not every coin on Coinmarketcap will be here when everybody is finally using the full potential of blockchain and crypto. Some projects will fail or be replaced by better ones. Others are only used in a niche, or in a certain country. There will also be blockchain projects that are not decentralized and that won’t allow investors to speculate on its value. Yet, blockchain technology is here to stay.
Also published on Medium.