Cryptocurrencies: Crash, correction, growth or extinction?
KINGSTON, NY, 21 September 2017—It’s been a wild ride in the cryptocurrency world as prices of Bitcoin spiked above $5,000 and dove below $3,000 in a matter of weeks.
Now, flirting in the $4,000 range, who and what was responsible for those wild swings, is it on the road to recovery, will it go lower or move higher?
One of those swings occurred last week when JPMorgan Chase CEO Jamie Dimon ratcheted up the anti-cryptocurrency hysteria saying “Bitcoin is not a real thing and it’s solely speculative."
Dimon, and other crypto skeptics, criticized cryptocurrencies for their lack of intrinsic value compared to other currencies.
WHAT MAKES FOR INTRINSIC VALUE?
What fiat currencies are they referring to?
The US dollar, which the Federal Reserve prints on an as-needed, on-demand basis?
Maybe they’re referring to the Chinese yuan, backed by a country that has a debt-to-GDP ratio approaching 300 percent?
Perhaps they’re referring to Japan, with its 10-year zero-interest government bonds and its debt-to-GDP ratio of 250 percent?
Or is it the ECB’s negative interest rate policy and the $2 trillion-plus bond-buying schemes that have them in love with the euro?
Bitcoin, the digital currency market leader, took an immediate hit of nearly 10 percent of its value following Dimon’s comments. But once again, the crypto markets, after hitting a rapid downward spiral for about 48 hours, recovered.
Why? Because societies worldwide are shifting from economies based primarily on ownership of material goods and their intrinsic value to one of accessing services. Younger generations have no physical connection to their nation’s currency as previous generations have had.
Digital is going mainstream.
THE LONG REACH OF GOVERNMENT
However, the global nature of the crypto trend, impacting emerging and established economies worldwide, signals significant volatility ahead.
These economies, each with different laws and business practices, will need to establish new governmental and business structures to regulate the creation and implementation of digital currencies. And that process will trigger uncertainty and, as a result, dramatic swings in market activity as we have seen since July.
As more nations worldwide go cashless, and the range of new cryptocurrency offerings widens, the participation among the general public to purchase digital currencies and investors to invest in them increases. And the speed at which digital currency investment is increasing is prompting governments to intervene, seeking to regulate or cease the growth of cryptocurrencies, which is triggering market uncertainty.
In addition, as the creation and use of cryptocurrencies continue to expand worldwide and new players enter an increasingly crowded field, the market will often respond with rapid and dramatic changes.
TREND FORECAST: While we forecast volatility in the cryptocurrency markets, we expect dramatic correction, and some might ultimately crash, only to be replaced by new cryptos.
As we have stated since the onset of the crypto trend, the highest volatility threat will be driven by governments exerting more control. But while this will cause the volatility we’re seeing, it will not derail the world’s transition to digital currencies.