Making Sense of the Cryptocurrency Crash 2018
How eerie is it that exactly 10 days ago, I was sitting in the exact same spot around the exact same time and writing about the possibility of an Ethereum crash? 10 days later, it has occurred and here I am, reiterating my stance. There’s little that has changed in my Ethereum price forecast for 2018 and I can tell you why.
As of now, a cryptocurrency carnage of epic proportions is underway. There’s blood splattered everywhere. Red digits are flashing on computer screens, hearts are sinking, dreams are breaking. January 2018 is turning out to be worse than January 2014. That was the last time the cryptocurrency markets had faced such a crash.
If there’s a lesson to be learned from this fiasco, it’s that investing in cryptocurrencies is not for the faint of heart. The weak-hearted do not stick their neck out when they are tested by time, they run for the hills at the first hint of danger.
But those who stick around and prove their mettle reap great rewards in the long run. Just take the example of the Bitcoin investors who held on to their coins through the 2013-2014 crash. They multiplied their investments exponentially in the following years.
The same will be true for investors of today. Those who hold the right coin and stay put in their holdings will have the last laugh once all this is over.
Why Ethereum Stayed Better Off in the Crypto Crash
When an average investor is asked to define his crypto investment, he gives us the generic definition. To him, cryptocurrencies are alternatives to fiat currency, vying to replace our monetary system. But mind you, Ethereum is unique in that it has come to exist for an entirely different purpose.
Ethereum is one of the three most valuable cryptocurrencies out there. There is a reason why this cryptocoin has weathered the crypto crash somewhat better than the other two cryptocurrencies—Bitcoin and Ripple.
Cryptocurrencies are largely believed to have been created to bypass the centralized control of banks and governments over our financial matters. Many believe that their ultimate use is to provide a decentralized platform where financial transactions can take place without third-party oversight.
While this is true for Bitcoin, Litecoin, to some extent Ripple, and a whole lot of other cryptocurrencies, this generic definition has little to no meaning in the case of Ethereum.
Ethereum is unlike any other cryptocurrency. If we were to speak strictly in terms of utility, Ethereum virtually beats every single cryptocurrency out there, even the mighty Bitcoin.
I like to call Ethereum the “Internet of the crypto world.” Simply put, it is a platform for creating decentralized applications (DApps), which may come in any form, size, and use. These could address a financial need or otherwise.
In short, Ethereum has used a holistic approach to build its use-cases. It caters to a multitude of users. In fact, this blockchain technology has more use-cases than we can count.
Nearly 1,000 decentralized applications are already running on its platform. To count a few of these apps, we have gaming, video streaming, social networking, crowdfunding, public voting, and messaging apps running on Ethereum. The total possible use-cases, however, are endless.
Viewed differently, Ethereum is the technology that vows to give us the Google and Facebook of tomorrow.
Ethereum’s X-Factor Will Salvage It from the ETH Crash
Ethereum’s unique moat is its ability to create demand for its cryptocoin from within, unlike other crypto coins, which rely on external user adoption. The applications created on its platform require Ethereum’s native token “ether” to be used for transactions.
We saw a demo of it when “CrytoKitties” was launched last year—an Ethereum-based game where players could trade rare cartoon cats in exchange for money (read: ether). The game’s overnight popularity caused a pop in ETH prices.
Ethereum provides users with countless such use-cases, inviting them to use ether. Compare it with Bitcoin or other similar cryptocurrencies, which have exactly one use-case—that is, to be used as a mode of payments. They must rely on individuals and merchants to drive their demand.
This is why ETH prices have been better able to withstand the selling pressure. You can gauge it by comparing the market value shed by the top three cryptocurrencies during the crash.
Chart courtesy of TradingView.com
Despite the crash, Ethereum is still up nearly 30% this year. The cherry on top is that big global corporations are now taking interest in Ethereum’s use-cases. Put alternatively, these real-world businesses may be further driving demand for ether.
Ethereum is forming corporate partnerships through the Enterprise Ethereum Alliance (EEA)—an initiative jointly undertaken by Ethereum developers and some global corporations to take Ethereum to the mainstream.
Notable names from the technology world that have become parties to the alliance include Microsoft Corporation (NASDAQ: MSFT), Intel Corporation (NASDAQ: INTC), and Cisco Systems, Inc. (NASDAQ: CSCO).
Banking industry giants are likewise taking a keen interest in its blockchain-based technology, which they may use for creating their own decentralized financial applications. Popular names that have joined hands with the EEA include JPMorgan Chase & Co. (NYSE: JPM), Credit Suisse, Barclays PLC (LON: BARC), and UBS Group AG (NYSE: UBS).
It’s worth pointing out here that the EEA is still in its early phase of development. It got its first Executive Director just yesterday. He promises to lead the EEA team from the front and form more constructive partnerships in the coming days. (Source: “Enterprise Ethereum Alliance Appoints First Executive Director,” CoinDesk, January 17, 2018.)
Long story short, I’m expecting Ethereum to see aggressive growth in the months to follow.
I may sound like a broken record repeating the same advice over and over, but I don’t see a better way to survive this cryptocurrency than by employing the simple formula of “HODLing”—that is, holding on to your coins for dear life. Rest assured that long-term investors will be the only survivors to emerge from this crypto carnage.
So if you’re a “HODLer,” the Ethereum crash would do you little damage. Ethereum’s utility as the Internet of cryptocurrencies, its unique ability to drive demand for ETH from within its network, and its ongoing partnerships with leading enterprises are three solid reasons to “HODL” this cryptocoin for the long run.