Bitcoin: the New Kid On the Block(chain) is Here to Stay

By Sean Brown | January 24, 2018

Apps like Robinhood have been trying to get millennials excited about the world of stock trading, but to most kids, crypto is still the coolest. The idea of participating in the earliest phases of something revolutionary seems to resonate particularly well with the 25-35 age group.

Unless you have thousands of dollars at your disposal — it’s not easy to get started in the stock market. Shares are typically on the pricey side and the market isn’t growing that much these days.

On the other hand, crypto is skyrocketing in popularity, and it feels significantly more accessible to investors with smaller budgets. You can easily take out a massive position in a new coin with a few hundred dollars.

Crypto is also faster paced and a lot more volatile in terms of day to day price action. Almost every piece of news influences the price of a coin in one way or another. This makes it particularly interesting to younger investors that don’t have the longest attention spans.

A Brief History

Bitcoin is nearing its tenth birthday, but it’s still new to 99% of the world. The rise of bitcoin and other cryptocurrencies can get quite complicated, so here’s a quick recap.

The first application of blockchain technology was designed to decentralize financial transactions in by using a cryptocurrency. The idea for bitcoin was made public in a white paper by someone under the moniker Satoshi Nakamoto.

After the coin started to gain popularity due to its anonymity and small transaction fees, other coins with similar aspirations started to pop up. In 2011, Charlie Lee introduced Litecoin — an alternative to bitcoin that could be sent and received faster with even lower fees.

With more exchanges popping up and new investors starting to sink their teeth in, bitcoin surged to over $1000 a coin back in 2013 before crashing down to $300 in the subsequent weeks.

In 2016, Vitalik Buterin proposed the idea for Ethereum — customizable, code-based contracts that can be executed on the blockchain, powered by its own cryptocurrency.

BTC soared to over $20,000 this last December, along with thousands of other alt-coins that started to gain momentum from a drastically increased public interest in the blockchain.

Decentralized Funding is Running Rampant

ICOs raised over $6 billion in 2017. The crazy part? There were at least 400 of them. That’s more than one ICO per day for an entire year.

ICOs are a crowdfunding method where founders sell underlying tokens on their platform for a fixed price in ETH or BTC. Early adopters buy at a fixed, discounted price hoping that each token will go up in value once the technology is released.

The amount of money being raised via ICOs is increasing exponentially as more investors flock to the market.

Less than $1B was raised from January to June, but skip forward to the month of December and that number increases to $1.6B.

Crypto is still unregulated in most of the world’s major tech hubs. That’s both a good and a bad thing. While it’s never been easier to get funding for a startup idea, it’s also never been easier to pull one over on people and make off with a ton of money.

Existing Businesses Are Pivoting to Blockchain

Crypto is so hot that even iced tea manufacturers are starting to get involved.

ICOs have become the overnight pivot for businesses experiencing trouble in 2018. Everyone is hopping on the bandwagon, from Long Island Brand Beverages to Kodak imaging solutions.

While their underlying intention may be pointed in the right direction, it’s impossible to shake the feeling that this move comes out of a desire to shoot some much-needed life into their stocks.

Keep in mind the SEC is starting to crack down on companies that do this. You can’t just slap crypto on your business in hopes of making a quick buck off of tech’s latest buzzword.

A Dangerous Pattern Is Starting to Form

There’s been a recent influx of new investors due to hype about the rising price. Adding volume is great for the market — but these new investors are a prime target for manipulation. Without the right strategy, people are spreading themselves thin on risky altcoins.

It’s easy to promise a ton of value and get new investors excited about your ICO. There are no qualifications required to launch a coin — savvy marketers can convince consumers any technology will be valuable as long as it’s tied to the blockchain.

But that’s simply not true. There’s a ton of hype, a ton of excitement, a ton of capital, but there’s not that much real world value. The market cap is sitting just under $500B right now yet blockchain technology still doesn’t have any mainstream use cases.

There are simply way too many players in the game right now. People are betting big on promises — and promises don’t hold value for too long.

Bitcoin Is a Bubble, but It’s Not Going to Pop Anytime Soon

International headlines light up about how bitcoin is crashing and the bubble is popping every time the price fluctuates by more than ten percent.

Cryptocurrencies and blockchain technology are still finding their places in the world. It’s impossible to expect a perfectly smooth rollout of something that is still being actively developed.

Cryptocurrency definitely has the makings to become popped bubble at some point, but you can’t start to form a bubble until the market becomes oversaturated.

Right now only 0.5% of the world possesses bitcoin — we’re still in the earliest stages of adoption. Not to mention, if investors can get savvy about sniffing out companies that don’t provide any real value to the market, a bubble can be avoided.