By Author – Kate, Australia
There is much news breaking out on the impending crash of cryptocurrencies sparking fear amongst investors. As of Jan 16, 1442 cryptocurrencies are currently being traded with the top 10 based on market capitalization being Bitcon BTC, Ethereum ETH, Ripple XRP, Bitcoin Cash BCH, Cardano ADA, Litecoin LTC, NEM XEM, NEO NEO, Stellar XLM, and MIOTA IOTA. Price of BTC was USD$135.30 in April 2013 and became USD$14,370 in January 2018, ETH was USD$2.83 in August 2015 and became USD$1397 in January 2018, while IOTA was USD$0.63 in January 2013 and became USD$3.93 in January 2018.
Cryptocurrencies has been related akin to or worse than the tulip mania in the 17th century or the Ponzi scheme and some governments are even considering banning it. Ravi Menon, the managing director of the Monetary Authority of Singapore (MAS) has said that he hopes the blockchain technology underpinning cryptocurrencies will not be undermined after the upcoming crash. This highlights the importance of understanding the fundamentals of blockchain technology and the way it is fuelling the rise of cryptocurrencies before making any investments.
Take for example Ripple’s token XRP that has yo-yoed above Ethereum’s token ETH and subsequently crashing after from the market capitalization of USD$123billion to USD$72billion. Blockchain is all about decentralization of data but Ripple’s XRP is a highly centralized currency. Its supplies are being controlled by the company and not by the individual investors, disabling them from mining new XRP. Ripple is widely accepted by financial institutions trading globally for being able to settle transactions 4000 times faster than Bitcoin but the Ripple platform that also accepts local currencies such as USD and Euros further undermine the XRP. Furthermore, South Korea’s prominent and frenzied cryptocurrency trading has pushed prices up in the South Korean exchanges making it more expensive than in the U.S. This went as far as causing crypto exchange Coinmarketcap.com to exclude lots of Korean exchanges from its price calculations hence impacting Ripple’s performance.
This brings to the conclusion that alternative cryptocurrencies a.k.a. altcoins with improved technology compared with bitcoin does not necessarily deliver better results at digital currency exchanges. While the technology underpinning it is sound, deep, and meaningful, a lot research needs to be conducted before investing on cryptocurrencies. Take advice from famous investor, Warren Buffett regarding cryptocurrency investment, “Why in the world should I take a long or short position in something I don’t know anything about.”
