“On August 7, 2018, the value of the global cryptocurrency market hovered at around $257 billion, supported by stability in the price of both Bitcoin and Ether, the native cryptocurrency of Ethereum, at $7,300 and $400 respectively.

Since then, within less than five days, the price of Bitcoin and Ether fell to $6,300 and $320, reaching $5,980 and $305 at their lowest points on August 11. In five days, more than $43 billion were wiped out of the market.”

Thomas Edison was an American inventor and businessman, who has been described as America's greatest inventor. He was ardently opposed to the gold standard and debt-based money. Famously, he was quoted in the New York Times stating, "Gold is a relic of Julius Caesar, and interest is an invention of Satan." My thoughts on interest are aligned with Thomas’ as interest free loans will fortify our markets and they are fair, you pay back what you borrow nothing less nothing more. Middle East has interest free bank loans which supports prosperity. Wonder what he’d have to say about Cryptocurrencies.

If you have been following me on LinkedIn I was amongst the first few to enthusiastically share the promise of cryptocurrencies when Bitcoin first released as open-source software in 2009. 9 years hence, I still think cryptocurrencies are promising for the future specifically space travel. For now though, I think cryptocurrencies are still in their infancy.

ImageCredit: BlockGeeks taken from Google Images

This crypto experiment is the best example of herding behaviour our generation has seen. Cryptocurrencies are built on cryptography. How it works is explained in the adjoining image.

Whilst blockchains are very powerful and can be leveraged to create transparency (think voting systems), automating payment processing and cutting their international transaction costs, self-enforcing contracts that make a payment automatically when a task is complete etc. crypto by itself is a virtual entity comprising of 0 and 1 which don’t have any intrinsic value of its own. As against this when you melt a $1 coin (and please don’t do it, it’s a crime) you are left with metal that has value i.e. can be used to create something out of or an equivalent value for it can be obtained. This is not the case with a crypto. In many ways then, it is like Emperor’ New Cloths. Oh, you don’t know the tale.

Different Cryptocurrencies | Image Credit: Google Images — Different Cryptocurrencies | Image Credit: Google Images

"The Emperor's New Clothes" (Danish: Kejserens nye klæder) is a short tale written by Danish author Hans Christian Andersen, about two weavers who promise an emperor a new suit of clothes that they say is invisible to those who are unfit for their positions, stupid, or incompetent – while in reality, they make no clothes at all, making everyone believe the clothes are invisible to them. When the emperor parades before his subjects in his new "clothes", no one dares to say that they do not see any suit of clothes on him for fear that they will be seen as stupid. Finally, a child cries out, "But he isn't wearing anything at all!" The tale has been translated into over 100 languages.

Many from the hard-working middle class have lost their life’ savings in the crypto game. As leaders we need to step up and call out what it truly is currently – only a game. More work needs to be done on crypto’ before we can start leveraging the intrinsic value of the 0 and 1 they represent in their very basic form.

Reasons for the Crypto fall:

1. In South Korea traders have been selling in response to news that the local authorities are considering passing a law that would end tax benefits for cryptocurrency exchanges.

2. There are reports that bank-owned currency trading utility CLS and enterprise software giant IBM are teaming up to trial the blockchain-based LedgerConnect. This is an application that offers services from different vendors including international banking giants Barclays and Citigroup. Forbes explains that “LedgerConnect will allow financial institutions to access distributed ledger technology-based services in areas such as know-your-customer processes, sanctions screening, collateral management, derivatives post-trade processing and reconciliation and market data.”

3. This could allow banks to skip cryptocurrencies and use their own systems which raises concerns resulting in bulk selling.

It is evident, given the steep decline in the valuation of the crypto market, that major cryptocurrencies have faced a strong downtrend over the past few weeks.

For the cryptocurrency market to experience a reversal in trend and momentum, not merely a 1 to 5 percent increase in value but up to 50 percent surge in its value, a drastic change in its volume and price trend will have to be recorded.

Follow up read: https://www.nature.com/news/the-future-of-cryptocurrencies-bitcoin-and-beyond-1.18447

Cryptocurrencies – The Rise and Fall

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