A more mature crypto market
Even as cries of a bubble get louder, the crypto market has actually trended in the direction of maturation. For one, governments are starting to recognize cryptocurrencies potential and embrace them in some ways. Japan recognized Bitcoin as a legal payment method in 2017 as well as certifying several cryptocurrency exchanges to operate within its borders. Russia announced plans to create its own cryptocurrency, the CryptoRuble, and even Venezuela has revealed plans to launch its own coin.
Others have started to regulate the crypto market, offering hope that increased stability will lead to greater adoption. The EU and several Asian countries have enacted new laws to bring some order to the market. Even in the US, major exchanges have started offering Bitcoin futures as tools for more institutional investment participation.
Dennis Gartman, economist and commodity analyst, The Gartman Letter editor:
"It [cryptocurrency] is gaining some sense of legitimacy by the Cboe.
...When they [cryptocurrencies holders] begin to pay taxes on it, when it ceases to be an avenue for avoiding taxes, when it ceases to be a place where drug dealers are trading and making transactions, then I'll be interested."
More importantly, however, businesses and entrepreneurs have embraced Blockchain, the market's underlying technology, creating a thriving ecosystem of applications and services.
Companies are finding better ways to utilize Blockchain's capabilities, instead of relying on cryptocurrencies' speculative gains. Already, several companies have introduced solutions that improve on several traditional business activities, from creating better agreements—companies such as Jincor, which offers simple smart contract creation—to giving consumers better access to services like financing and cloud storage. Blockchain startups like Cryptopay are facilitating payments with cryptocurrencies, while others like SelfKey are focused on creating better forms of identification for individuals. Moreover, in the financial sphere, businesses like Legolas are improving wealth management and investment platforms.
These applications are quickly gaining popularity, and new companies are finding diverse ways to migrate their services to this architecture. However, many have natural barriers, as Blockchain requires a new round of development and hires.
Currently, most companies still rely on Ethereum's ERC-20 protocol and smart contracts to build new applications, but that paradigm is still dev-heavy. Instead, some companies have already shown better pathways to developing Blockchain-based apps.
This nascent sector has already shown promise, and new applications are further expanding the ecosystem. Qtum, for example, provides a hybrid infrastructure for developers to build Blockchain applications that are suitable for operating with the major Blockchains, while also compatible with mobile and IoT services. The company's dual architecture is based on Bitcoin Core and Ethereum Virtual Machine to allow for the use of smart contracts across platforms. The end-deliverable is a lighter-weight product with cross-chain functionality that outmatches Ethereum's capabilities while broadening Blockchain's appeal. The company has shown significant promise and caught investors' attention, rewarding the valuation with a near 200percent leap higher in December 2017.
Image: Coinmarketcap
Most importantly, however, cryptocurrencies are beginning to find real use cases. Ripple has been successful in carving a niche in banking and business-to-business transactions. Bitcoin Cash promises to solve many of Bitcoin's shortcomings as a payment method, namely scaling and transaction speed. Meanwhile, Ethereum has proven its worth as an infrastructure for application development.
Even with the high volatility in the cryptocurrency market, the overarching trend in 2017 has been overwhelmingly positive. As the industry becomes more widely accepted, it could help significantly stabilize the recent wave of volatility.
2018 could be promising
There are signs that the crypto market is still rather unstable, including sky-high valuations and a rapid pace of growth that has rivaled manias of the past, but 2017 still closed on a strong note.
However, success in the next year will rely heavily on broader adoption. And a market that can withstand speculation waves. Should Bitcoin valuations remain highly volatile, investors and exchanges will eventually be scared off, and trading may decrease. The recent extreme swings experienced by the broader market highlights how precarious the current boom is.
Chart showing the Bitcoin price movement since 2013
2018 is promising to be a momentous year for the industry. As fears of a bubble collapse increase, many are looking at it optimistically. In their eyes, the ecosystem is ripe for a cleaning, and removing underperformers and unsustainable projects could enable the real contenders to grow. Moreover, a wave of consolidation and the entry of institutional investment into the sphere could lead to broader adoption and a more stable market.
Though the crypto market is growing, it must show sustainability and deliver better fungibility. As more companies demonstrate effective uses for cryptocurrencies and Blockchain technology, the overall ecosystem should continue to stabilize and expand as awareness of its inherent benefits improves.
