Most cryptocurrencies will go to zero.
That was the call made earlier this month by Goldman Sachs’ head of investment research, Steve Strongin.
“Whether any of today’s cryptocurrencies will survive over the long run seems unlikely to me, although parts of them may evolve and survive,” Strongin said. “Because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero.”
According to Coinmarketcap.com, there are 1,515 cryptocurrencies out there. Strongin is probably more right than he is wrong: many of these coins and the startups that issued them won’t live to see 2020.
Hundreds have volume so thin that if it wasn’t for the founders and advisors trading in and out they’d probably be worthless.
But while the rare few have heard of coins like TrickyCoin and the new BibiCoin — a joke coin touted as a way to help pay for Israeli bribes on the blockchain — the top 10 cryptocurrencies are not going to zero anytime soon.
Bitcoin is still down 18% year-to-date, but it has bounced from its $6,900 low from two weeks ago. The last two weeks have added another $4,000 to the gains of intrepid, fearless cryptocurrency investors who bought in when most people were running for the door.
The recent recovery is mainly due to improving sentiment, says Naeem Aslam, the chief market analyst for ThinkCoin in London. South Korea is no longer considering a ban on cryptocurrency exchanges. They are moving in favor of professionalizing cryptocurrency trading instead. “Only a few weeks ago some officials talked about stopping all sorts of crypto trading,” Aslam says.
For close cryptocurrency watchers and investors, news about the upcoming SegWit update code for Bitcoin, the 16th update since inception, means transaction process times will be faster and — in theory — cheaper. The slowness of bitcoin and the expense of transacting in it has had numerous companies turn away from accepting bitcoin as payment. That gives Bitcoin support.
Israel’s government is taking crypto more seriously, too. Their tax approach is similar to property tax and may be a signal that cryptocurrency is being taken seriously…at least over there. Many new blockchain and cryptocurrency startups are coming out of Israel.
From a technical perspective, resistance of $11,555 is an important level for Bitcoin. It broke through that on Feb. 19 before settling lower. This means more bulls are in control than bears.
“If we stay above 10K, the path of least resistance is skewed to the upside,” says Aslam.
Cryptocurrencies have sold off substantially, but the market capitalization for startups that issue their own coins to fund projects has risen fourfold. In 2016, the total market cap for digital currencies was over $12 billion. Today it sits at just under $500 billion.
Bitcoin has become synonymous with blockchain technology. Like other cryptos, Bitcoin was designed as a system to allow online payments to be sent directly from one party to another without the need for a trusted third party, like a financial institution. Cryptocurrencies are designed mainly as a form of payment, or as the equivalent of a discount coupon for payment for the services and products offered by the issuer.
The performance of bitcoin and newly emerging cryptocurrencies has intensified debates on the stability and sustainability of all these new digital currencies. Although Bitcoin’s value has soared over 1,000% in the past 12 months, there has not been a proportional explosion in transactional volume, note analysts from Credit Suisse in a 107-page report titled Blockchain 2.0 published in January.
Bitcoin now has more competition from other coins, namely ether, which supposedly has faster transaction speeds and lower costs. As a speculative investment, Bitcoin now has hundreds of new competitors.
Credit Suisse analysts led by Charles Brennan in London believe Bitcoin and other cryptocurrencies will remain niche payment networks for the foreseeable future. This has become consensus at this point, even at Goldman.
“Cryptocurrencies are primarily being used as digital stores and speculative vehicles of value – not digital systems poised to disrupt the existing payments space in the near term,” Credit Suisse report authors wrote.
Rather than predicting that most cryptocurrencies become worthless sooner rather than later, Credit Suisse thinks the entire industry is worth watching, mainly as a source of funding for ever-expanding blockchain technology startups.
“It’s difficult to contextualize digital currencies during this intense period of speculation,” Brennan and his colleagues wrote, adding that cryptocurrencies are the beginning of a potential revolution in how information is transacted and verified across the world.
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