Over the past months I became interested in the possibilities that crypto currencies have to offer. At first I became interested in the idea that crypto currency could play an important role in international money transfers, replacing traditional currency like the dollar, euro and pound and traditional transfering methods. At the same time I realised that at the moment there are a number of causes that will prevent crypto currencies to become intensively used in money transfering.
The crypto currency market, especially the one for Bitcoin has known many up and down swings over the years since its introduction in 2009. Although there were some near-meltdowns along its path over the past 9 years, 2017 proved to be a kind of ‘break through’ year where the price half way 2017 increased from $ 1.000 to $ 3.000. This increase and potential prospect of future gains for simply holding on to crypto currencies will create an effect where the owners of their crypto currencies rather not want to hand them over to others. Yet even if the owner of a crypto currency would want to transfer an amount to another party there are lots of complications at the moment. There are still few people (ask the ones around you) who own an ewallet allowing them to receive or send digital cash, there is no way to send between different type of crypto currencies and last but not least there are few (web) shops that accept crypto currencies for paying goods or services.
When diving in the technology behind the crypto currency you will find the block chain technology, that can be considered as a transparant, autonomous and highly secure way of storing data, the comparison to a world wide operating virtual ledger or spreadsheet is often made.
The blockchain technology drives crypto currency but blockchain technology could actually be applied to a lot of other practices. What we are witnessing is a revolutionary way in which administrative (economical) processes will be changing over the coming decades and maybe even beyond that (identity management, asset registration). Without going into detail too deep in the underlying technology we witness the emerge of an autonomous, transparant, de-centralized infrastructure that offer possibilities in which we currently are using banks, clearing institutes, accountancy firms to perform most of these duties. With blockchain technology we have all these activities under one roof, but without the boundaries and middle men that operate along the borders between these specialisations.
If you look at the developments from this perspective than investing in Bitcoin, Ethereum or one the hundreds of alternative altcoins becomes like investing in a company -like stock-, although they lack the traditional centralized management that we usually associate with the companies we know. It then becomes obvious that the market capitalization of (for example) Ethereum does signal something about its economic relevance and may be compared to ‘traditional’ companies. That is why you often will now read or hear about ICO’s (Initial Coin Offerings) which can be compared to the virtual launch of an IPO (Initial Public Offering), the most usual way for a company that is going public by issuing stock and entering the stock market.
Let’s take for example such a ‘traditional’ company, Apple, which had in June a market capitalisation of app. $ 675 billion, making it the company with the largest market capitalisation in the world. Ethereum on the other hand had at the same time a market capitalisation of approximality $ 30 billion. So Apple as a 40 year old company producing computer related goods and services is at the moment 20x the size of Ethereum, a highly advanced initiative that takes the Bitcoin blockchain technology to the next level with its abilities of incorporating development tools in its own block chain technology.
From such a perspective it is justified to believe that Ethereum one day will become bigger than Apple, measured by its market capitalisation because its added economical value will become more significant than Apple’s. It may be tempting to make calculations about what the pricing of one Ether (Ethereum’s crypto currency) could be like in such a scenario, but one can assume that the current price of ca. $300 is only a fragment of its pricing potential. Others have been less witholding about their predictions about what the the pricing for crypto currencies could become like.
All in all investing in crypto currencies is at the moment is more like earning a stake in a promising, technological break through. The traditional lines between stock and currency are blurring as you might one day use that stake (your Ethers, Bitcoins or other altcoins) one day for actually performing money transfers, something that would be impossible to do with regular stock from the ‘traditional’ companies. Yet take in consideration there is a big probability that reading this article in three years time the playing field might completely have changed.