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As the City of London’s first cryptocurrency market advisory and investment firm we have seen the price of bitcoin rise from the lows of $150 back in 2013 to the highs of $20,000 in late 2017, before a steep slide back to today’s $6,300 (correct at time of writing - 15 August 2018).
For those who entered the market at its peak in December 2017, this has proven to be a tough ride as the cryptocurrency market hasn’t delivered the exponential returns one expected. Quite the opposite really, leaving many with significant losses at this point. The rally was unjustified in our opinion and fuelled mostly by media hype around the ballooning price. A snowball effect ensued, with all and sundry loading savings into cryptos based on FOMO (Fear Of Missing Out) and not necessarily with a full understanding of what they were investing in. As the correction started bringing the price lower, panic hit. New investors - facing almost immediate losses - started pulling out the market triggering further drop-off, and so it goes.
And it’s not the first time this has happened.
In late October 2013, a media frenzy erupted that extensively reported on the groundbreaking technology. Over the period of a month, the price of a single bitcoin soared from $150 to $1,242. A fundamentally gratuitous surge with no technical reason driving the price. As a result, the all-time high was short-lived and the price tumbled to settle in at the $500 - $600 range.
What is most interesting, however, is the wider historical view - the panoramic perspective. When viewed against the backdrop of Bitcoin’s lifetime price chart, the drama of 2013/2014 fades to a mere speck, a pebble on a vast beach. There is still a long way to go before the mainstream adopt the technology, and when that happens can you imagine how small the surge-and-purge of 2017/2018 will look on the timeline? The current dip simply represents another incredible buying opportunity for those who have their eye on the intrinsic value and long-term potential, instead of the current price point.
The true value of cryptocurrency lies in its ability to facilitate financial sovereignty; to empower us to break free from the shackles of the incumbent financial system we are born into. A system that restricts true economic potential, and dictates our interaction with money that is never genuinely ours anyway. It is based on debt, and that debt comes at a cost to us.
The nature of fiat currency is that it is backed by nothing more than the promise of central authorities that it is worth what they say it is. Add to this the issue of endless supply and you have recipe for disaster. Through quantitative easing the total amount can be expanded at any given time and basics economics tells us that the greater the supply, the lower the demand. The direct result is that price depreciates. For fiat currency, this means that the new supply siphons value from the existing supply and we see an overall depreciation of what you can buy for the same number of Pounds. As state-educated individuals, we accept this as a general rise in cost of goods and services, but in truth, it is a direct consequence of the government's elite position to borrow more than they can ever realistically pay back, with citizens fitting the bill for their political spending. It is a never-ending cycle, and we haven’t even touched on interest and taxation, which simply means that the central authorities, and their various stakeholders, are assured of profit from every monetary transaction we are ever involved in.
Blockchain technology, which underpins cryptocurrency, ushers in a new world. It breaks the mould of bureaucracy, and provides a framework where irrespective of location or status, we are afforded an equal role in economic inclusion, without the fees and red tape associated with the traditional system. It’s an operating system that blows open unlimited global trade unlike anything we’ve seen before, and we’re only just at the point where the decentralised foundation has been laid. We’re still in the elementary stages of development of the commercial applications that will continue to open more and more opportunities of cryptocurrency utility, and that is value that will far outweigh any current price point. The real upside is still to be realised.