Past the Crypto Bubble Barrier

Existing CryptoCurrency Security Threats

Whilst cryptocurrencies are more secure than traditional currencies, in many ways, the infrastructure that supports it is currently weak.  A great example was Mt. Gox – a Bitcoin exchange which processed roughly 75 percent of all Bitcoin-to-currency transactions at the time.  Between 2011 and 2014 the company was exposed to hackers who stole more than $450 million dollars.  Having said this, it is still legitimately safe to store cryptocurrency assets on professional ledgers.

CryptoCurrency Regulatory Insecurity

On the surface it may seem that cryptocurrencies will continue to face scrutiny in the face of governments, institutions and public figures alike trying to regulate the asset.  What is certain is that history repeats itself and so does human behavior – people first fear what’s new, then they try to understand it, only then do they have the confidence to control it.  There will never be complete control over cryptocurrency.  Banks and governments will somewhat control taxation but that’s as much so far.

The Supply and Demand Uncertainty

The two main advantages of cryptocurrencies are limited supply and decentralized bookkeeping.  Bitcoin was created in such a way that the total market cap could never exceed a roughly 21 million Bitcoin threshold, and since there is no direct government influence, value is set by supply and demand.  The potential dangers with a deregulated currency is that it is prone to pump and dump schemes.

Wealthy traders could push prices up by buying a lot – thereby stimulating demand, once profits have been made, the same traders would push prices down by selling everything.  The current market disadvantage is that there is no central figure to monitor such activities, and the recent volatility is only proof that cryptocurrencies have a long way to go before they become legal tender.

Arguably, a long way to go is closer than we think – a good example is Sweden’s plan to become a leading cashless society.  Cryptocurrencies are both a threat and an opportunity, regardless of your stance.

Digital Currency Valuation Issues

There are currently more than 1,100 cryptocurrencies, and the list keeps growing, hence the recent crackdown on ICO’s.  Since 2013 Bitcoin has seen more than 50% of its market share disappear.  The wider the digital currency market grows, the more distributed the market share.  This makes it hard for traditional investors to understand Bitcoin’s valuation.  This is not to say that the current value is high or low, rather, it is to say that more information is required to make Bitcoin and cryptocurrencies in general, a safer, less volatile and more predictable investment asset.

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