At present, the world of cryptocurrency is one of the most controversial subjects in the field of finance. On the one hand, figures like JP Morgan’s CEO Jamie Dimon called it “fraud” and described those who sell it “stupid”. On the other hand, there are those who see cryptocurrencies as one of the most revolutionary forces of finance. But against the background of the debate, there are many people who ask how to evaluate this tool and why Bitcoin has recently reached such a high point, namely $ 20,000.
The answer is now simple: there are no fundamental reasons.
Robert Schiller, who won the 2013 Nobel Prize in evaluating asset prices, also recently noted that the cost of bitcoin is “extremely ambiguous”.
There is no doubt that there is a tremendous amount of speculation on the crypto-currency market. But when the bubble bursts and the hype goes down, then we can find value, and all this comes down to options for using different currencies on the market.
When bitcoin was created in 2009, the goal was to create an electronic system of cross-border payments. Currently, the problem is that the number of transactions with bitcoins is at record levels, while the faster traditional payment systems actually demonstrate their superiority. It is difficult to say that bitcoin has an inalienable value that does not depend on the people who exchange it. But, as many have said, bitcoins can become “digital gold” and in this case the price should increase again. But looking to the future, it is very likely that other digital tokens can beat bitcoins because of their practicality
Look at the ether (Ethereum). The company declares itself as a successful platform for others to create applications based on it. Blocking is the basic technology behind bitcoin and acts as a decentralized transaction log. But its use goes far beyond the bitcoin. Ethereum has its own blocking system, which is being tested by companies such as Microsoft and JP Morgan.
The etherium is specially designed for so-called intelligent contracts, which are parts of the software that execute the contract after all the parties involved have met certain conditions. This eliminates the need for complex documents and errors.
Ripple is another blockbusiness company that deals with cross-border payments in different currencies within seconds. A digital currency created by a company called XRP serves as a connecting currency to facilitate transactions.
This year, Ethereum and Ripple have shown an incredible rally, but both of these currencies are in the early stages of their experiments. But in the future, evaluating them can be easier. For example, if Ripple started to process trillions of dollars that are transferred across borders, we could start setting a price for an XRP. If Ethereum was responsible for a series of commercial finance operations, we could use a similar assessment. Of course, all this is very simplistic and the biggest risk is that people lose confidence in these platforms and in cryptocurrencies. There is also the danger that they can be replaced by something better.
Crypto-currencies and digital tokens will remain, but they are unlikely to survive in their current form. However, one of the great advantages of the “explosion” of the current bubble could be that we are getting real innovations in many areas, and the estimates are becoming a bit clearer.