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03 November 2018
INVESTMENT

Why the crypto crash saved its future

William Mullally, Editor, WEALTH Arabia, writes his thoughts on what the first quarter of 2018 means for the future of cryptocurrency after a delirious 2017

shutterstock/Zapp2Photo


Cryptocurrency investors loved how things went in 2017—though the story hasn’t been the same so far in 2018. As I’m sure many of our readers know, it has been a trying quarter for the cryptocurrency space. Its premiere currency, Bitcoin, has fallen back to earth after rocketing forward in 2017, and across the market, many coins have followed suit. With the risk of me sounding too negative, my thoughts are exactly the opposite—this is a very good thing for cryptocurrency. We have, all together, gone through the various phases together when a game-changing technology bursts on to the scene. First, complete and utter scepticism.

For early adopters, how many times did you get this reaction when you told them about cryptocurrency. “You’re investing in what? How does that work? Pfft. Yeah. Good luck with that.”

As crypto continued its path forward and its underlying blockchain technology proved to have so many practical applications we have only begun to scratch the surface even now, a new conversation emerged. Very serious people started to take the technology more seriously, though many remained sceptical. It was 2017 that was the real moment for crypto, when so many were finally convinced by the gobs of new millionaires popping up worldwide that they were convinced that they could not let this pass them by.

I’m sure many of our readers might agree that this was, by far, the most dangerous moment for cryptocurrency, because the sort of growth it experienced made it run the risk of becoming exactly what it promised never to be—a traditional bubble. Even outside of the numbers, I’m sure you all saw the signs. When bitcoin hit 20,000, that was when my friends and family whose previous investment experience can be encompassed by the phrase “beanie babies” started messaging me, the beloved financial journalist in their lives, to tell me that they had either just bought, or would like to. More and more people popped up in the space, declaring themselves ‘cryptopreneurs’, but when you talked to them, they seemed to only talk about the number of people who had gotten rich. When there are that many people who lack the substance and financial know-how, things get scary fast. Posters on the bitcoin subreddit seemed to be engaging more in a religious cult experience than an investment strategy. Predators pop up, Ponzi schemes emerge, pump and dumps ramp up, and bad actors manipulate those that are most easily manipulated.

The first quarter of 2018 may be the best thing that ever happened to the cryptocurrency space. Last fall at the second annual WEALTH Arabia Summit, a tenured colleague of mine heckled from the audience during my blockchain panel, god bless him, that bitcoin reminded him of the tulip craze in Belgium in the 19th century—the ultimate bubble troll. Of course, his point was reductive, as cryptocurrency and bitcoin are truly transformative as technologies, and are not a blip on the scale, but a sea change that will change the financial world forever.

A momentary drop, coupled with the increased talk of regulation and bans, are exactly what crypto needs to mature. Google and Facebook banning the marketing of ICOs will stop people like my poor aunt being taken in by a get rich quick scheme—they will not slow down growth. As regulation talk increases—just recently, Taiwan’s Minister of Justice, Qui Taisan, called for crypto regulations to be in place by November—and the G20 countries will likely have something in place by the end of the year—this will not harm cryptocurrency, it will signal its coming of age. Institutional investors and key individuals have already taken crypto seriously, and regulation will only bring in more established and knowledgeable players into the market, creating the next wave of a more responsible and hopefully less volatile cryptocurrency market that can act more as a reliable store of wealth than just a pure currency. OF course, there are those of you in the audience that still want to view themselves as pirates braving uncharted waters, and surely, that aspect of the space will remain. But we should welcome the changes and corrections, and have less unease about the future of cryptocurrency than ever before.

The question I ask myself most often now is—what currency will be the google of crypto? In my opinion, though we have many blue-chip currencies leading the way at the moment, none of them is the google—the space is still developing. Bitcoin in many ways seems outdated and outmoded—perhaps it is the Yahoo—in 20 years, you’ll still be getting emails on it from your grandmother, but you have not searched for anything on it in at least 10. In the long term, if perhaps the world bank or IMF launches a crypto to help fund a country’s development, perhaps that will signal the next phase. Perhaps it will be a currency issued by a country like Belgium or China, or perhaps with Russia’s support of Ethereum, things will develop more in that direction. Still, that does not mean that investors should sit back and wait—the space is still vital now, and an essential part of your portfolio, provided you can live with the risk.


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