The Consequences Of Bitcoin Taking Off Too Early And How Cryptocurrencies Can Bounce Back
The Consequences Of Crypto Taking Off Too Early
Today, blockchain technology and cryptocurrencies are hot topics, and after the events of the last 12 months, it is understandable why. However, before the 2017 bull run, and before thousands of investors joined the space, there was early 2017.
It was early 2017 when the ball started rolling, and some experts believe that the chain of events that has led us here started at this time. The first hint of the crypto craze that was to come was believed to be a massive increase in demand when it comes to blockchain talents. Especially on freelance talent marketplaces such as Upwork.
This was the start of a new line of work, which later gave birth to ICO advisory services, different engineering projects, and blockchain consultancy in general. The demand for blockchain engineers and developers continued to grow ever since January 2017.
The situation doesn't only include freelance talents, but institutional professionals as well. Many of them decided to leave their positions, and start their new life in the crypto and blockchain industry. One example is Goldman Sachs' former derivatives trader, Juthica Chou. After spending seven years at the Goldman Sachs' Securities Division, she left to eventually become the COO at LedgerX.
Billionaire Mike Novogratz is also known for hiring several high-profile individuals who came from Goldman, such as Richard Kim, Galaxy Digital's COO, or Esther Babb, who became Gemini's Director of Business Development. Despite the fact that the crypto industry reached its peak in January 2018, and has since then entered a period known as “crypto winter“, where constant losses continue to damage the market, experienced engineers are did not stop trying to find employment in this industry.
An Attractive Sector That Has Led To Trouble
Institutions and institutional investors themselves started understanding that investing in the sector provided much bigger returns than traditional methods. Fidelity did it, and so did TD Ameritrade, while the trading platform Bakkt has nearly arrived thanks to NYSE/ICE, and support provided by Microsoft, Starbucks, and others.
Through crypto history, investing in Bitcoin has always been extremely beneficial for those who decided to stick to their investment. While the price is known for going down for long periods after each new all-time high, it usually only comes back larger each time.
Of course, the sector has other issues as well, and not every project succeeds. There was a time when a new ICO was capable of raising as much as $100 million in 30 minutes if it's hot enough. However, there are nearly 1,000 dead coins that were believed to have the potential to become big.
On the other hand, there are around 2,100 tokens in the market cap at this moment, and a lot of them are registered as “utilities”. However, many have issues with passing the Howey Test, which is expected to continue in 2019. The SEC has already ordered a number of projects to refund their ICO investors.
In 2017, when ICOs were starting to become popular, the SEC warned companies that their tokens might be securities. However, the trend was too hot, and there was money to be made, so firms such as Paragon and AirToken did not pay much attention to such warnings.
While many projects had more than decent ideas, they also had no plans regarding how to execute said ideas, despite the fact that they have managed to secure a certain capital through ICO. Many of them assumed that they will have years to figure things out, so everyone focused on raising the funds, but not on treasury management. Due to several factors, including the lack of treasury management, most of this money has already disappeared, and things are only going to get worse in 2019 for a lot of these projects.
The Scaling Problem
One of the biggest problems of early cryptos, such as Bitcoin itself, still revolves around scalability. Bitcoin is still stuck at 7 TPS, and even Ethereum can only handle 15 TPS, although Vitalik Buterin seems to believe that the key for solving the issue lies in zk-snarks. Meanwhile, dApps are flooding the network with transactions that cannot be processed in time due to current limitations.
The ability to scale is of great importance for the future of crypto, and many often compare them to TPS offered by MasterCard and Visa, which is at around 2,000 TPS. Many even compare cryptocurrencies to early social networks, like MySpace, which simply disappeared in time, only to be replaced by better alternatives, such as Facebook and Twitter.
One popular opinion is that 2019 will be the year when such “better alternatives” will start appearing in the crypto world. However, there are also those who believe that even 2019 is still too early for that. Many believe that the crypto space is not ready for everything that it has gone through already, that most of it happened too early in its history. Especially when it comes to 2017 bull run that took off so suddenly.
The crypto space is maturing rapidly, and it is more than possible that 2019 will be better, more mature, and ready for the next step in crypto evolution. Even right now, after losing so much of its value, Bitcoin is still around 8 times larger than it was two or three years ago. This is what encourages many to become HODLers, since crypto is definitely not ready to die, even if the same is true for progressing further.
Due to its potential, its use cases, and the fact that the very idea of a cryptocurrency is game-changing, cryptos will not disappear. They will likely only return stronger and better, and maybe a bit more cautious. Eventually, experts, analysts, and crypto enthusiasts, in general, can all agree on one thing — that cryptocurrencies will change the world.