Those who have been watching with interest from the sidelines as cryptocurrency mania has unfolded over the past few months tend to fall into two categories. The first, larger group, are the passively intrigued keen to learn more about cryptocurrencies with general knowledge of current affairs their main incentive.
This group wants to know what is going on and be able to add their two pence worth to conversations around the coffee machine at work, around the dinner table or in the bar. Most are pretty sure what we’ve seen over the past few months is a massive bubble without discounting the possibility that cryptocurrencies will have some future role in financial systems – though what exactly that will be is hard to call at this stage. They have no or little intention of actually acquiring any cryptocurrency themselves at this stage.
The second group are those thinking ‘I wish I had bought some Bitcoin or Ether or Ripple a year or two ago but it’s too late now. Prices have gone too high for a speculative investment to be worth it’. They do, however, keep slightly enviously asking their friends or family who do own some cryptocurrency how it is doing in comparison to the price they originally bought in at.
However, if a recent prediction by Charles Hoskinson, a co-founder and former chief executive of Ethereum, turns out to be accurate, this group may not have missed the last boat in terms of the window of opportunity for investing online in cryptocurrencies at a lower value than today’s.
In a Friday inverview with U.S. media giants CNBC, Hoskinson, who is currently in charge at blockchain research company IOHK, predicted a cryptocurrencies crash. He believes that the pace of price growth over the past 12 months has gone way beyond what cryptocurrency market fundamentals support. That is especially the case for many of the hundreds of smaller cryptocurrency projects that don’t really offer anything better or different to the larger competitors such as Bitcoin, Ethereum and Ripple.
He believes that the hype around cryptocurrencies has created an environment in which many unrealistic cryptocurrency projects have managed to secure massive funding. However, that alone will not help them survive in the long term:
“What’s going to occur is a lot of these ventures that don’t have strong fundamentals, don’t have good tech, or just unrealistic projects, they will eventually run into some major wall they can’t quite overcome. They will fracture up and you will see a lot of them are certain to fail.”
However, Hoskinson also thinks that the chances are that this process will take some time. He points to the fact that there are numerous unviable cryptocurrency projects that are losing $5-$10 million a year but have hundreds of millions in funding. However, according to Hoskinson, eventually fail these projects will. This process could be accelerated by a wider bursting of the crypyocurrency bubble with the big names also losing significant value.
Dogecoin, a Bitcoin rival initially launched as a joke, saw its total market capitalisation double from $1 billion to $2 billion over last weekend. Founder Peter Jackson, has been quick to temper over-enthusiasm from current and potential investors by trying to put recent developments into a more objective, realistic context. He tweeted even before the price of Dogecoin doubled:
“I have a lot of faith in the Dogecoin Core development team to keep the software stable and secure, but I think it says a lot about the state of the cryptocurrency space in general that a currency with a dog on it which hasn’t released a software update in over two years has $1 billion market.”
It also says a lot when the founders of cryptocurrencies are trying to pour cold water on valuations of their own coins, in which they have huge vested interest.
So, if you think that cryptocurrencies do generally have a bright future and would considering investing online in them but think current prices are a bubble – sit tight. Get in when the crash comes!