About a year ago (maybe a little more), cryptocurrencies were all the rage. Their value was increasing quite rapidly, but they were also becoming a main stream way of investing and eventually doing business. Many people put a lot of money into cryptocurrencies in search of a fast way of making more money. The plan, for many, was to wait until the value rose and then to get out.
But that’s not how it went down. In order to get out of the cryptocurrency game, you needed someone to buy out your stake and take on the risk themselves. Think of it like buying a house. If you no longer want to own the house, you have to find someone to take it off your hands. If that house is in bad shape or is wildly overvalued, there’s a good chance you’re going to have a hard time getting it taken off your hands. That’s kind of the risk that someone is running when they get into cryptocurrencies. But 2018 wasn’t a good time for those who invested in cryptocurrencies. In fact, it was the year that people got wise to cryptocurrencies, and regulators got their acts together in order to make it harder for people to purchase.
All through 2018, and even late last year, I wrote about how cryptocurrencies seemed like a good idea, but there was going to come a time when the bubble was going to burst. Not because I am a cryptocurrency expert, but because the whole premise seemed too good to be true. Bitcoin looked really good in December, 2017 sitting at $19,352. But by the same time in 2018, it had dropped to just $3,360. The same can be said for Ethereum, which fell from $1,405 to $88.71 over the course of 2018.
All the major cryptocurrencies saw their values collapse, and several crypto-focused startups were forced to close. Earlier this month, Bloomberg reported on a number of companies that were wiped out pretty quickly because they were holding crypto assets. With values diminishing, very few investors were willing to hand over any more cash in order to keep them going.
My interpretation is that the bubble is bursting, however, many still believe that this is just a correction that we often see in currency markets. The solution? Keep holding. They are suggesting that you wait for the rebound in order to get even richer. It makes you wonder if this rally will actually happen? Further, is it possible for 1 BTC to ever cost close to $20,000 again?
I think we’re living in a different time now. The SEC has made it clear that it sees Initial Coin Offerings (ICOs) under their jurisdiction. An ICO is like an IPO, but with coins being traded. Ethereum has given people the ability to roll out their own ICO, but these can often become the target for people with less than honorable intentions. According to one study by the Satis Group, around $1.3 billion had been invested in fraudulent ICOs by July of this year.
Where cryptocurrency failed was in its attempt to offer freedom to people. That might sound extreme, but it provided the ability to be free from taxation and regulation. Which means more money in your pocket. But we don’t live in that world. We live in a world where the laws attempt to protect a working society. And they should. Without it, we would have chaos. Regardless of these attributes, cryptocurrency seems to have had its day. Will it return with some other iteration? I’m not a psychic, but if it does, it will need to do some deep self reflection in order to come back stronger.