From a high of above $19,000, twelve months ago, to a low of $3,000 today, Bitcoin, which is the world largest crypto, has been on a free fall.
The same can be said about other cryptos with the likes of Ethereum losing more than 80% of their value in less than a year. In general, the crypto industry has shed off over $500 billion since December 2017.
Will the industry stabilize any time soon or is it headed to zero? This is a question every crypto enthusiast is asking. Even for those who were previously convinced that the industry would never go down, the latest dip is enough reason to be worried.
Analyst opinions differ, but almost all agree that a good number of cryptos are going to zero. Today, there are over 1,500 digital coins, the majority of which are pretty much dead. Here are expert opinions on the future of digital money.
Some analysts believe that cryptos will eventually stabilize and gain mass adoption. According to them, the current price volatility is nothing but a reaction towards irrational exuberance. Like any other assets, the price of cryptos is subject to the forces of demand and supply.
Most investors tend to buy assets based on what they hear others saying about it and not the fundamentals. When these types of investors are hopeful that the asset will go up, they will buy in large numbers hence artificially driving the prices up.
Likewise, when there is a rumor that the prices will go down, they will sell in large numbers hence driving the prices down. When these types of investors exit the market, the prices are likely to gain stability since the noise is filtered out and they are only dependent on fundamentals.
The big question is whether the crypto markets have already hit the correction bottom or they are going to decline further.
In a Bank of England Conference held in London in 2017, Christine Lagarde, the head of IMF presented a paper detailing the impact of technology on the financial sector.
Among the topics was the potential of cryptos to revolutionize the payments industry. Lagarde believes that the distributed ledger technology provides a new and highly viable way of thinking and central banks should pay attention.
The IMF head reiterates her viewpoint in another report presented in the 2018 Singapore Fintech Festival. Lagarde believes that central banks should start considering issuing state-backed tokens. The wheel is already rolling with central banks in countries such as Uruguay, Sweden, China, and Canada showing interest in this idea.
The opponents of cryptos believe that the crypto industry is headed south because it is impractical. First, there are scalability challenges with major cryptocurrencies such as bitcoin which makes them not ripe for mass adoption.
For instance, Bitcoin can only process seven transactions per second compared to traditional methods such as Visa, which can do 24 thousand transactions per second. Ripple, the fastest crypto can do 1307 transactions per second only.
Also, accessing cryptos is a tedious process involving cramming complex codes and owning wallets and fobs. For the average person, the already well-established ways of owning cryptos are out of reach. However, this is not enough reason to shun away cryptos. The crypto world is already working on solutions that will make it possible to hold cryptos in debit and credit cards securely.
The concept of cryptocurrencies is based on the blockchain, a technology that is believed to be nearly unhackable. To hack a blockchain, the attacker would need to have a computing power equal to 51% of the power of all the computers in the network.
While this type of attack is hard to execute and does not make any economic sense, it is possible. This article by Coin Central explains how a blockchain can be hacked. Some people argue that there is no incentive to adopting cryptos if they can be hacked.
Another reason why some people believe that cryptos will eventually go to zero is the vulnerabilities identified in most crypto exchanges. In the recent past, incidents of hacking on exchanges having gone up prompting mass sellouts.
Like any other new technology, blockchain and cryptos are bound to go through a series of challenges before being refined enough to mass adoption. The technology is legit but still not ripe for mass adoption.
For now, crypto prices are only dependent on investor sentiment which is not enough determinant of the viability of the technology. The prices are therefore likely to remain volatile.
Furthermore, with proper regulation, mass adoption is likely to accelerate. Currently, many people stay away from the industry given the level of scammers hiding behind legit projects. Regulation can clean up the industry by weeding out these scammers.