Cryptocurrency Markets Are Still Not For Main Street Investors
Recent weeks have seen major moves in the fledgling world of cryptocurrencies. The dramatic exit of one of Bitcoin’s main developers has lead to a period of uncertainty and price volatility.
It has also offered a window into which one of the newer cryptos – Ethereum – has taken centre stage.
Ethereum, is better described as a global platform than a currency, but there is a currency as part of the project. As the crypto world has developed, projects have been conceived and launched that fix issues in or evolve further on the original ideas of Bitcoin. This means that while Bitcoin and the blockchain were truly transformative, there are much more transformative ideas now and Ethereum is probably the most extreme of these.
In fact, this transformative nature, combined with the wobble in bitcoin has seen Ethereum’s price and market capitalization leap upwards. Only a few weeks ago, the price of Ether was just under US$1, but briefly on 3rd March that price touched $10. Can you think of any other assets that have performed so well in 2016?
Bitcoin
Image/CASASCIUS
Projects like this are at the far end of high risk and require a detailed technical knowledge to understand and assess that risk, making them unsuitable for most investors. In fact, while the price has roared upwards, it has actually been incredibly volatile and not for the faint of heart.
Assessing what the price ought to be requires an astonishing amount of guesswork. Bitcoin is now established enough that while many people still ask why is the price of bitcoin so volatile, there is enough of an underpinning of actual trade that people can make a bullish case. While the case for ethereum is incredible, the reality is that the project is still much too early to be able to justify much more than wild speculation.
This also shows just how unrelated to reality cryptocurrencies still are. When wild speculation can force a price up so quickly and there is little more to justify the price than hype and hope, it defies most rational analysis. If that wasn’t enough, the rise in Ethereum has seen it become the second most important crypto, even though there are many more developed projects that already exist.
Additionally, wild speculation and dramatic price rises are not helpful to people that might actually want to use and spend the currency. What retailer would want to set a price and see it alter by 20% overnight? This is still a very real problem for bitcoin and it is a much more developed ecosystem with many more retailers and a much steadier pulse.
For now, the asset to own in 2016 is still much to unpredictable to actually own.
Guest Author: Stuart Langridge
photo https://en.bitcoin.it/wiki/Main_Page
