Cryptocurrency has seen a massive spike in all of its metrics during 2017. Search traffic, number of transactions, number of press pieces and, most important, prices have set and reset record highs over the past nine months. With all of this attention being given to cryptocurrencies, many people are wondering if this is a bubble ready to burst.
It can be very hard to determine whether a bubble exists and if it does when it might burst, but the general belief is that cryptocurrencies are not going to crash in the near future. However, the only way for cryptocurrencies to ensure they avoid a crash is to make the transition into mass adoption. Currently, a number of trends are pointing in this direction.
- Steady traffic growth.
- Consumer-friendly applications.
- Increased public awareness.
- Industry-wide growth.
1. Steady traffic growth.
Bitcoin currently has a market cap (total value) of over $100 billion. According to Google Trends, the term “Bitcoin” is currently near all-time highs for search traffic, and nearly triple what the traffic levels were at the beginning of 2017. A glance at Google Trends charts for “Bitcoin,” “Ether” and “cryptocurrency” indicates that all areas of cryptocurrencies have had steady growth in traffic, with a high correlation between traffic and price.
Since cryptocurrencies are networks, their viability rests on their network size. Bitcoin, the largest cryptocurrency, is worth about twice as much as Uber and four times as much as American Airlines. At a certain point, these networks reach a large enough size to run efficiently and also be too big to fail. For this reason, always keep an eye on search traffic and number of transactions, because these metrics can help tell an underlying story about the systems.
2. Consumer-friendly applications.
Recently there have been a number of notable “Initial Coin Offerings,” or ICOs, which launch new cryptocurrencies. These launches have also ushered in a new wave of features for cryptocurrency networks. The newly launched offerings are significantly more consumer friendly than earlier iterations. Whether this involves a network with more explicit functionality (or an “app token”) or simply trying to set up the cryptocurrency for an optimal user experience, this transition is necessary for mass market adoption.
The Game Protocol is an upcoming and promising ICO for a completely decentralized gaming ecosystem. The Game Protocol is a platform for game developers to create and distribute games on the Blockchain. The platform will provide game creators with the tools to advertise and distribute their work, while allowing developers to raise funds to implement their projects. This process eliminates the biases created within centralized market places and fundraising platforms.
Additionally, The Divi Project is an upcoming ICO that is aiming to build a more intuitive “smart wallet,” and is also tackling the issue of gender divide in cryptocurrency. Women currently make up a mere 5-7% of cryptocurrency users. Divi is trying to change this by creating a crypto ecosystem that is more appealing to women. Their innovations should allow the average consumer who has no familiarity with technology or code to confidently enter the emerging space.
3. Increased public awareness.
While this is a bit harder to track than other metrics, cryptocurrency has swiftly gone from a niche tech term to a commonplace financial term. Every day, new press exposure helps inform the public about this invention and how they can partake in it. As people become more familiar and comfortable with the crypto industry, their chances of participating increase.
Another major part of an increased public awareness is simply educating people about what blockchain is, what it can do and how they should evaluate it. It is important to recognize that this is a new frontier, and one that many people are scared of. Only awareness and education can train people to look for possibilities rather than weaknesses in the industry. The upside is that there has been an incredible shift in society during the past few years, and the average understanding of cryptocurrency is rising rapidly.
4. Industry-wide growth.
In the world of forecasting, experts use a “cone of uncertainty” to measure the chances of reaching a certain milestone based on previously accomplished milestones. Most of Bitcoin’s future milestones are based on continued growth, while Ether and other tokens will likely follow Bitcoin’s expansion pattern. There is a loose association between currencies, as a spike in Bitcoin typically means a boost in other currencies.
For instance, when Bitcoin spiked from $4K to $6K during October 2017, Ether and Litecoin saw a series of small rises and falls during the same time period. However, it should be noted that these fluctuations are not always great predictors of future behavior.
With the completion of various user metrics, valuations and awareness, crypto investors ought to be able to predict how closely a currency will follow in Bitcoin’s footsteps. As the industry grows, it continues to establish the model for cryptocurrencies and indicates a greater likelihood of reaching the final milestone of mass adoption.
Whether you own a massive stake in cryptocurrencies or are just beginning to understand how they work, the current business environment is continuing to indicate mass adoption of crypto as the likely end result. However, always be careful when investing in cryptocurrencies, as they are more volatile than government-regulated stocks and are exposed to a number of low-likelihood risks that could be devastating and trigger a market crash.