HomeNewsCrypto Bitcoin’s Price Drops Over 30% – Pop Goes the Weasel Crypto, NewsBeware of Bitcoin Lyrics Bitcoin is not a futuristic currency but a speculative mania.Greed is pushing prices skyward but fear will quickly bring those same prices crashing back to earth.Investors need to separate the promising technological innovation of digital currency from the Bitcoin Ponzi scheme that will harm those that fail to exit before the bottom falls out.Bitcoin is another example of “market innovation” that deserves closer scrutiny from the Securities and Exchange Commission.SEC Chairman Mary Jo White has said virtual currency itself may not be considered a “security,” but interest issued or returns gained by it likely would be and therefore subject to regulation.Federal Reserve Chairman Ben Bernanke told Congress that the Fed “does not necessarily have authority to directly supervise or regulate these innovations.” And the Justice Department says Bitcoin is legal, but that doesn’t mean it is adequately market tested, investment safe and ready to be a global currency.

Asset bubbles have three phases: growth, maturity and pop.Bitcoin was created in 2009, hitting its growth stage in 2011 and maturity stage in 2013.Now it is ready to pop, having reached the nosebleed price of over $1,000, up from $13 since January.In addition to high-tech stocks, Chinese real estate and high-end artwork, Bitcoin can be added to the list of speculative bubbles that will not end well for investors.Unfortunately, the bubble run-up in Bitcoin and reputational damage will destroy a potential innovation that could have been used for legitimate market purposes.Silk Road, the deep web purveyor of drugs, guns and prostitution was its biggest promoter.Dangerous price movements — over 5,000 percent increase this year — also hamper its adoption as a trusted currency.dollar, which is backed by faith in the largest economy in the world, Bitcoin has no backing and lacks a stable or predictable price, inhibiting commerce.Placing high risk bets on a fad asset is not for the faint of heart.

Compared to other assets, Bitcoin is over 7 times as volatile as gold and over 8 times as volatile as the S&P 500.Recent Bitcoin price movements make owning Zambian kwacha seem boring.ethereum chart euroThe benefits of digital currency to reduce transaction cost and compete with Visa and MasterCard has real promise for consumers.bitcoin cambio valutaBut to claim that volatile Bitcoin is the currency of the future in its current “Wild West” stage is intellectually dishonest.litecoin debit cardThere are numerous digital currency alternatives evolving including PeerCoin, Litecoin and Anoncoin that are gaining investor interest and challenge the notion that Bitcoin will be the market standard.bitcoin market cap graph

Very few credible retail shops even accept Bitcoin which leaves the bulk of interest with speculators.Bitcoin has no underlying value and is simply a digital way to place bets and attempt to capitalize on it by claiming built-in scarcity and hyped demand.bitcoin armory wikiIn reality, it is a virtual coin created by computer programmers out of thin air.bitcoin atm in englandThese are computer geeks — not central bankers that understand capital markets and how global economics works.Bitcoin only has value if speculative interest remains.Prices could drop as dramatically as they have risen, inflicting substantial financial losses, causing investors to flee.In the last week, prices have risen by over 60 percent and could easily fall by that same amount or more.Once sellers outnumber buyers, prices will eventually drop below $10, erasing all gains.

This price collapse will occur by the first half of 2014.Bitcoin is not a currency with intrinsic value but a hyper bubble fueled by a get-rich-quick mindset.Can the 12 million digitally manufactured Bitcoins in circulation really be worth $12 billion?If so, why can’t 12 million rare clamshells discovered on a remote island be worth $12 billion?At least with clamshells there is history supporting their use as viable currency.In the last month, Bitcoin has increased over six fold — from $150 to over $1,000 — despite the fact that underlying fundamentals have not changed, nor do they support such lofty prices.Is one Bitcoin mined by a computer really worth the equivalent of close to one ounce of gold?The supposedly maximum number of Bitcoin that will be mined remains at 21 million.Yet these internet coins can also be broken down into almost infinite bite sizes.Skyrocketing prices have increased the number of computers participating in this modern gold rush, raising legitimate concerns about whether existing controls will be adequate to prevent market manipulation schemes.

If Bitcoin is not backed by anything and has no underlying value, why have prices risen to the clouds?Speculators are being sold on hype and recent price spikes have been used to claim this flawed investment premise is rock solid.Real value is created through meaningful innovation and adoption — not from smoke and mirror deception.Senate testimony, soon-to-be Fed chief Janet Yellen missed an important opportunity to call out Bitcoin as an example of a dangerous speculative bubble.Smart investors needn’t wait to be told.About “Beware of Bitcoin” Mark Williams, who teaches finance at the Boston University School of Management, is one of the harshest critics of Bitcoin.He has also predicted that the price of Bitcoin will fall 99% by June.Cryptocurrencies are rising at an exponential rate against traditional holdings like the dollar and the FTSE 100.The question everyone wants an answer to: can it last?Is it sustainable or will the bubble burst?In the past week I’ve had countless emails from people asking me where they buy Ether/Bitcoin and if they should invest.

To those of us who have been in the Blockchain/DLT space for a while, I’m sure this is a familiar story.If this is something you’re thinking about, or if you’re in financial services and your clients are asking you what they should do, then this blog post is for you (and hopefully quite cathartic for the Blockchain community!)Bitcoin, the first official cryptocurrency, was launched in 2008 in Satoshi Nakamoto’s paper, .It launched Bitcoin as the first internet and international currency, used in peer-to-peer translations without a centralised entity.People bought Bitcoin, saw the price rise, and felt like they were getting rich quick!Then in 2014 disaster struck, an exchange (a place to buy Bitcoin) called MtGox was hacked, triggering a massive sell-off.Bitcoin dropped from $1,300 to ~$250 over the space of a few weeks.Bankers chuckled; a generation of nerds just got an MBA in economics the hard way.In the wake of the crash, the conversation changed to “” and we saw an explosion of alternative currencies (“alt coins”) and blockchain platforms that could be used for purposes beyond finance, most notably Ethereum, which was launched in 2015 after being ‘2 weeks away’ from launching in early 2014.

Ethereum built on the the same blockchain ideas of Bitcoin – but with an audacious vision of becoming a world computer (don’t ask, just if you want to go down the rabbit hole).At the same time, the large incumbent industries woke up to the idea of a less centralised technology solving their problems.Banks, who spend half of their time checking that their records match the other banks’ records, wondered if a shared ledger – or shared database – could save them money and make them more efficient.Typified by initiatives such as the and Hyperledger foundation, 2015 was the year the incumbents wanted their slice of the action.With cryptocurrency prices at all-time lows and incumbents wading into the blockchain/DLT space, and sometimes even changing many of its core ideas all together, 2015 was to my mind was the for ‘public’ blockchain technologies.Then, quietly, the Bitcoin price began to rise, and rise and rise.In February of 2017 I remember tweeting “Don’t call it a comeback, but… Bitcoin is back and higher than it has ever been.” Suddenly, towards the end of April 2017, all hell broke loose.

Prices began to explode; Bitcoin was up, but Z-Cash, Ripple and especially Ethereum were up by massive percentages.Ethereum was up 2000% on the FTSE, and an individual bitcoin was valued at nearly $3000.Indeed, the value of cryptocurrencies has risen so sharply in the last few months that the market cap for all cryptocurrencies passed $100bn in Q2 2017.Not only has the value of cryptocurrencies risen, but also the profile of the currencies themselves around the world, so that traditional banks, financial institutions and governing bodies have begun to sit up and take note.In the coming parts we’ll cover why this is all happened/is happening: Cryptocurrencies expert and COO of Z-Cash, Jack Gavigan, writes that he finds the rise of cryptocurrencies reminiscent of the dotcom boom of the late 90s.He describes the cryptocurrency sphere of development as “a new economic frontier – virgin territory”, which people are simultaneously keen to explore and invest in, and others are equally keen to condemn.

Small, dynamic technology companies are better placed to react and interact within this sphere, unlike big incumbents which are averse to risk and are usually behind the first wave, still trying to figure out what this progress means and whether or not they should get involved.Jack predicts that the technology and disruption to the current norm will prevail, regardless of any setbacks along the way, just as it did in the 90s.It is easy for critics to write off the rise of cryptocurrencies to such heights in such a short amount of time as a bubble waiting to burst, with a price crash imminent.The favoured analogy is that of the sharp inflation of price of certain .The price rose as demand increased until single tulips were several hundred times the price of bread or any other commodity of the age.Eventually the bubble burst and everyone who had bought tulips was clamouring to sell them off at a huge loss, and many people went bankrupt.There is a lot of commentary online that the same could happen for cryptocurrencies.

Indeed, in recent days it looks like the upward march may have halted.However, crashes are relative.Bitcoin has already crashed once, when its price fell from $1200 to $173, but as we see it has more than recovered.A drop in price does not mean that it’s game over, as it was for the 17th century Dutch tulip industry.Cryptocurrencies have had major sources of investment poured into them and the blockchain industry as a whole, and the technology is evolving all the time to make the market more diverse, safe, and open to all.The future of crypto assets and tokens depends heavily on social, political and regulatory acceptance of them, and people’s perceptions are changing.The narrative in Financial Services for some time has been “We love the technology but not the currency”.Back in 2013, people were unsure if Bitcoin was even legal and there was a lot of negative press around the sorts of nefarious transactions that could be made using Bitcoin and ledgers.Fast forward to the present and all financial institutions, banks large and small, and even governing bodies now have blockchain research teams.

Even the EU recently announced a pledge of €5million into blockchain research, surveillance and regulations – a big step forward into getting cryptocurrency and blockchain into the public consciousness and cementing it as the future.This would have been unthinkable in 2013.Jack Gavigan suggests that communication between experts, regulatory bodies and investors is the key to cryptocurrency’s future, to ensure an understanding of cryptocurrency is brought to a wider industry audience.This largely unregulated space needs open communication with regulators to ensure that when regulation happens it is fair and progressive, to allow for future development.In a series of tweets he wrote: “It is incumbent upon all of us to help regulators (and law enforcement) understand this new technology and its implications….The adversarial attitude that some people in the crypto sector adopt towards regulators is entirely counter-productive…Good communication will lead to better understanding, which will result in sensible regulation, which will foster growth.” The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.

Taking Fitzgerald’s words on board, we can hold the view that cryptocurrency’s rise is both a speculative bubble and quite possibly a revolution in how tech is funded – it can be neither, it can be both.If I’m in a financial services company, I’d look at the public blockchain space again since that’s where much of the true innovation is happening.The ‘private’ blockchain space will solve real problems for the financial services sector, but I can’t help thinking the answer isn’t a ‘public’ or a ‘private’ Blockchain/DLT – but ‘public and private’ that will produce the future of financial services.You cannot ignore the fact that there are at least 7,000 Ethereum developers who find the community organically.The answer isn’t a ‘public’ or a ‘private’ blockchain/DLT but a ‘public and private’ blockchain/DLT that will produce the future of financial services Next week: Tokens; what are they?What do they mean?And should I launch an ICO?Want to learn more about all things cryptocurrency but can’t wait for the next blog?