Julian Hosp of TenX has suggested several scenarios which might trigger the cataclysmic crypto crash feared by investors and (it often seems) prayed for by traditional financial players. But even as he discusses these potential triggers, the possibility of a crypto Chernobyl may actually be lessening as more money pours into Altcoins.
Hosp contends that among the causes of a crash could be:
- One or more leading exchanges failing
- A Tether meltdown
- Credit card purchasers being forced to close positions
- And of course, governmental regulation
While these are indeed all cause for concern, there are other aspects to the maturing cryptocurrency industry that provide hope that the end is not nigh.
For example, while the flow of cash into the markets may have ebbed somewhat since the most feverish media coverage at the tail end of 2017 there is still money entering the crypto world at a rapid rate (represented in an interesting fashion on FiatLeak).
The difference between the New Crypto Economy and the Bitcoin-like stores of value that have dominated headlines until the last few months, however, are fundamental and reassuring.
The arrival on the scene of hundreds of ICO-funded startups has created an ecosystem much more likely to be self-sustaining than a handful of coins representing a mutually-agreed value. Just as a population of a million songbirds has more chance of survival in the long-term than a population of just 60 Amur leopards, an economy with a vast array of players and projects can be expected to thrive better than one that only includes a handful of ultra-early adopters.
The criticisms leveled at cryptocurrencies by naysayers such as JPMorgan Chase CEO Jamie Dimon are often directed at the fundamental notion that trust as a commodity has value – this, they believe, represents bubble thinking and will lead to an irreversible crypto Chernobyl (although it is of course the foundation of all currency, ultimately). However, in the New Crypto Economy, many of the ICOs have inherent value as enablers of one or more of the three key disruptive forces in business: faster, better, or quicker than something that already exists. A world with a better way of tracking the illegal trade in Amur leopards, or a way to protect your information from Big Data snoopers, is a world that has something better – and this real value is the key to the survival of the crypto economy.
Over hundreds of projects, thousands of developers and millions of users and investors are now collaborating to rapidly bring positive technological change to Web 2.0 business models. They’re innovating with Web 3.0 possibilities that didn’t exist a year ago. The ecosystem is in full-on creative mode, and the point at which it can be described as genuinely self-sustaining may have arrived.
Although mass hysteria around Bitcoin may continue to drive the headlines, the trend toward tokenizing new business ideas for rapid financing and agile development is possibly what 2017 and 2018 will truly be remembered for. The crypto sector is moving from speculation to solid investment in real companies.
Bitcoin may recover its luster if the technology behind it can evolve, or another store of value may take its place. But in the New Crypto Economy, the real protection against a Crypto Chernobyl meltdown is the gradual erosion of Bitcoin dominance (today, down to 34% of the total crypto cap) and the rise of successful blockchain endeavors that trade at realistic market capitalizations.
Whether current valuations of ICO projects are realistic, of course, may be another story entirely. And just like the failure of an Enron or an AIG, a big failure will cause huge fallout. But also, just like the mortgage market, the banking industry, or the automakers, the inevitable Black Swan event will eventually be absorbed and the ripples caused across an entire economy will subside.
At the very moment of this last sentence, the Dow Jones Industrial Index hit a record at 26,491. Proof, if proof be needed, that panic is not a long-term human condition.