Is There a Future for Cryptos?

All appears quiet in the world of crypto.

The roaring optimism we saw last year has died down considerably. With bitcoin falling 50% to US$9,900, the headlines are no longer shouting, ‘It could hit 1 million’. And as for the other all-star coins, well, they haven’t been faring much better either.

Ethereum is struggling to reach US$800 after falling 38% percent from US$1,300. And ripple has tumbled down to US$0.90 from its high of US$3.

Overall, US$550 billion has been wiped off the entire cryptocurrency market in the space of a few months. A decline that has come as a shock to the system for many. It has even put into question the viability of the crypto market itself.

Of course, expectations were too high to begin with. Like most tech booms, cryptos’ debut into the mainstream was jarring to say the least. Moving rapidly from a niche tech concept, that only fringe communities knew of, to an investment extravaganza everyone was scrambling to get in on.

That said, cryptos are by no means a recent innovation. They’ve been circulating for close to 10 years now and the revolutionary ideas behind them have been in development for even longer.

It’s only in the last year that cryptos became known for their rapid growth and envy-inducing returns. And the possibility for an ordinary investor to become a crypto-millionaire subsequently caused the mania to take hold.

This frenzy spread far beyond the investing community — enticing unlikely buyers looking for quick gains. As those fickle investors were unaware of how volatile crypto markets could be, they have suffered the most from the erratic fluctuations.

The ABC recently reported that about half of all initial coin offerings launched last year have either failed or disappeared. Millions of dollars simply vanished into thin air.

The long list of exchange hacks has been another major setback for investors. To name a few, the Coincheck exchange hack last month saw $530 million worth of cryptocurrency stolen. And the Bitfinex hack of 2016 lost approximately $72 million worth of bitcoin.

When you add the price volatility onto this, cryptos clearly aren’t a safe bet. But it’s their exciting nature that has kept people investing against all rational judgement. Everyone, particularly millennials, want a piece of the pie. And for those who have grown up in the digital age, the appeal of this technology has kept the crypto trend alive.

Right now, new cryptos are popping up all the time. Blockchain innovations are even more prevalent. Major companies are keen to jump on the bandwagon to modernise their businesses and gain publicity.

For example, Amazon is considering introducing an ‘Amazon Coin’. Many Amazon users responded positively to a survey which asked whether consumers would use the crypto.

Starbucks is also planning to introduce crypto and blockchain into their business, creating a completely cashless store.  

Meanwhile, Garrett Camp, the chairman of Uber, has just created his own cryptocurrency called ‘Eco’. His aim was to make a new and improved coin that tackled the issues cryptos have been facing. Making it more secure and efficient in terms of transactions and energy usage.

Clearly, the crypto market is still alive and kicking.

The unregulated status of the crypto market means there is still a high level of risk involved. So it’s important to invest based on the advice of experts, rather than mainstream opinion.

Sam Volkering has been involved in cryptocurrencies since their inception. He has recently released a report on the cryptos he believes could truly disrupt the financial system as we know it. To access it, click here.

This week in Markets and Money

With Trump’s recent decision to impose trade tariffs, the future of global trade looks uncertain. Not only will this decision severely damage trade relations across nations, but it will also send shockwaves throughout the world’s economies. The proposed aim of the tariffs was to quell the Middle Kingdom’s rising power. But as Selva wrote on Monday, they will likely backfire on the US before they hurt China…

For all the details on this story, click here.

On Tuesday, Selva observed that the property market appears to be slowing. Property prices have been dropping across Australia and investors are getting spooked. With credit tightening, debt mounting and the prospect of rising interest rates, Selva thinks the housing market could be in for a bumpy ride. So if you’re an investor it could be time to buckle up.

To read the full story, click here.

The results of Italy’s recent election came as a surprise to many. The policies of the leading Five Star Movement party are geared towards leaving the EU and drastically lowering immigration levels. And as Selva wrote on Wednesday, the success of this euro-sceptic party could spell danger for Italian banks and cheap debt. Which could have a significant impact on the whole of Europe…

To learn more, click here.

On Thursday, Selva noted that the RBA has left interest rates unchanged for 17 meetings in a row. By keeping them at the record low of 1.50% they had hoped to fuel inflation. But so far this plan has failed to come to fruition. And as low interest rates punish savers, investors are taking more risks to boost their returns. A strategy which can have some devastating consequences…

To read the full story, click here.

On Friday Selva delved into one of Michael’s (the lead character in the cautionary tale from Thursday’s report) bad investments: priority shares. Known to Australian investors as hybrid shares, the big four issued $27.58 billion of these securities last July. These same, ‘highly complex’, securities were banned in the UK, way back in 2014.

To read why these could be a potential danger for the Australian market, click here.

Until next week,

Katie Johnson,
Editor, Markets & Money

Katherine Johnson, usually going by just ‘Katie’, is a member of Port Phillip Publishing’s editorial team, as well as the Editor of the Saturday edition of Markets & Money. Katie works with all of your editors to maintain the quality of their research and analysis. In her Saturday Markets & Money articles she specialises in cryptocurrency and technology stories, and brings you a recap of the week from your other Markets and Money editors.

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