The Current Trough of Disillusionment
Earlier this month, the Wall Street Journal published an article on Bitcoin's vanishing hype and how we have entered the boring phase of this new technology. According to the WSJ, Bitcoin prices lost about two-thirds their value after a December high, when the first bitcoin futures contract launched at Cboe Global Markets. In fact, the article states that Bitcoin's average daily trading volume is currently about 70% lower than on the most active days at the end of 2017.
The article goes on to quote Vijay Boyapati, a software engineer in Seattle who admits that while we are in the boring phase, this is when the most value is created. Boyapti appears to be among the early adopters who still believe in cryptocurrencies, people who bought in years ago and, as the article notes, "HODL" an acronym for "hold on for dear life."
Boyapti's comments reminded me of commentary in RF Financial News about the Hype Cycle and Technology Adoption Lifecycle (see image below). RF Culbertson believes that we are still in the "Trough of Disillusionment" phase and that we will see a drop in price before cryptocurrencies really pick up for good. He believes this is because financial institutions know that a digital currency solution is the correct path but are still fighting to maintain the status quo.
"They know that a decentralized cryptocurrency operates without a single point of failure – which is the only way to win against hackers and bad actors. Even J.P. Morgan is fighting to use traditional methods in the offshore banking industry, even though the transfer of fiat currencies require significant manual labor for: transaction verification, anti-money laundering checks, and payment clearing. Cryptocurrencies like Bitcoin and Ethereum have significant advantages in a number of these areas including: security, borderless transaction settlement, efficient payment clearance, and lack of dependence on centralized service providers," said Culbertson.
While cryptocurrencies have lost some of their hype, it doesn't mean there isn't opportunity in the market. Many believe we are just getting started. Even if you aren't an early adopter, you can still follow the leader.
*Chart created by RF Culbertson