If Cryptocurrencies Are So Bad Then Why Are They Becoming More Popular?

A lot of professional economists now live their lives to bash and criticize cryptocurrencies and their place in the modern world. Evidence of this abounds through a cursory look on Twitter, Linkedin or Facebook. It’s more divisive than the Brexit and the American President – or at least feels it.

I think the reason for them to constantly throwing the bubble buzzword out there all the time is that they are not looking beyond the surface of what these cryptocurrencies are built on. As well as economists, you have governments and banks who are also determined to write off these digital assets as snake oil and frauds. Makes you wonder if something is so worthless why millions of nothing gets stolen in online heists each month?

In case you need reminding why Crypto is different than the Tulipmania…

Institutional Money

84 funds were launched in 2017 focused on Crypto. That’s an estimated $2 billion of assets under management. 2018 is bound to see in my view a Crypto exchange-traded fund. This is a natural progression from the CBOE and CME futures on Cryptos.

Blockchain

“Yes, the blockchain may seem like the very worst of speculative capitalism right now, and yes, it is demonically challenging to understand. But the beautiful thing about open protocols is that they can be steered in surprising new directions by the people who discover and champion them in their infancy. Right now, the only real hope for a revival of the open protocol ethos lies in the blockchain” says the New York Times.

The launch of cryptocurrencies has unleashed a new wave of technology that can bring about a new understanding and new way of doing things. Technology like blockchain has opened up a new level of trust between people, by way of decentralized databases.

CryptoKitties, a blockchain company, hit sales of $12m in their first month. There’s no doubt that blockchain technology is absolutely here to stay and shift focus from centralized applications to decentralized applications. If you are unaware of what blockchain is, it is an open ledger that allows for information to be distributed but not copied, and it is currently creating a new type of Internet.

You see, information that is held on a blockchain network exists as a shared and continually reconciled database. The shared aspect is the most important and offers the most benefits, when compared to a centralized database, because the database isn’t stored in any single location, like a data center for example, but rather it is spread out across an entire network, which makes it extremely difficult for any hacker to corrupt.

This type of storage technique is why blockchain would be great at transforming the financial infrastructure in the modern world because it removes the need for trust between corporations and people. Since Bitcoin’s launch in 2009, the use of blockchain has become more widespread, people have begun to see the obvious benefits of such a technology and the way it can improve services.

Initial Coin Offerings

Cryptocurrencies have brought about a new method of raising capital, that trumps the previous way of approaching venture capitalists and angels. Now, you don’t need to approach anyone, the investors flock to you, by means of initial coin offerings which have gained momentum in 2017 with various platforms launching their own ICOs to raise funds. $3.7 billion was raised via ICOs in 2017.

Take Filecoin who launched their own ICO and managed to raise $257,000,000 in funding in exchange for SAFTs or Simple Agreements for Future Tokens. Filecoin was so successful that it attracted the attention of notable venture capital firms such as Sequoia Capital and Union Square Ventures.

Now with the media narrative claiming that cryptocurrencies are all caught up in giant bubbles and are likely to pop “any day”, then ask yourself why credible venture capital firms are so eager to get in on the action?

When you consider that ICOs are going to get easier because of platforms like CoinList and Balanc3 which make due diligence and accounting and reporting easier, you can see why ICOs will almost certainly grow in 2018.

Of course, there will be regulation – this will spur not hinder growth – the right kind of growth.

Global Acceptance

There’s no doubt that cryptocurrencies are here to stay, with so much attention that is being thrown in that general direction, it will be a matter of time before there is global acceptance if these digital coins. 2018 is expected to see the number of people who own cryptocurrencies triple, with drivers of this adoption will be because of the positive connotation of holding digital value. Not only that but it is becoming easier for people to gain access to cryptocurrencies as an investment, with platforms like Coinbase and Binance taking steps to make the process a lot less cumbersome.

Soon we will start to see global companies jump on the bandwagon when they realize the only way to utilize the technology for their benefit is to hop on board. It goes back to that old adage, “first they ignore you, then they laugh at you, then they fight you, then you win”. In my eyes, global authorities won’t have the power to destabilize the cryptocurrency market, but rather be forced to join it as it has already started with cryptocurrency futures being launched on the global stock exchanges. Nevertheless what will happen to their prices is another question.

Alpesh B Patel (@alpeshbp)

Alpesh is a hedge fund manager and Author of Trading Online (Financial Times). He is a partner to 24option who offer CFD trading on Cryptocurrencies.

The content of this article constitutes Marketing Communication and does not qualify as Investment Advice or Investment Research. This article is produced by Alpesh Patel. Any views or opinions presented in this article are solely those of the author and do not necessarily represent those of 24option. The article is of a general nature and does not take into consideration individual readers’ personal circumstances, investment experience, and current financial situation. 24option accepts no liability for the content of this article, or for the consequences of any actions taken on the basis of the information provided.