The Ups and Downs of Cryptocurrencies
Find cryptocurrencies a bit cryptic? You’d certainly be forgiven for it. They’re mined digitally, traded digitally, and have the potential to completely transform the way our financial system works. They’re also exceptionally volatile.
The first digital currency, Bitcoin, started nearly a decade ago and recently soared to near the $20,000 mark at the end of 2017 before falling again. And there are now well over 1,380 different cryptocurrencies circulating, 39 of which have a market capitalization of over $1 billion.
But when it comes to cryptocurrency prices, even financial media commentators don’t quite know what’s going on. Cryptocurrencies duck and dive, crash and peak, sneak up and surprise. Since they aren’t pegged to economic performance like the stock market is, these fluctuations tend to be driven largely by perceptions of the intrinsic value of each currency.
But with cryptos so dependent on computer science, they can come under existential threat from those with sufficient know-how. This happened to Bitcoin in June 2014, when a group of miners built up enough processing power to (theoretically) destroy the currency. In June 2016, Ethereum was subjected to a potentially devastating $56 million hack. And yet both currencies have since gone from strong to stronger.
Ripple and Litecoin have also been a key players over the years, rarely falling out of the top five. And with a recent announcement that the Japan Bank Consortium will use Ripple’s blockchain technology to power a groundbreaking app called ‘MoneyTap,’ Ripple is laying a foundation to revolutionize domestic and cross-border payments – and perhaps eventually challenge Bitcoin and Ethereum for the top spots.
A couple of 2016 news stories really show the two sides of the crypto coin in terms of its public perception. In February it emerged that Japan was considering making Bitcoin legal tender. A few months later, a US judge ruled that the same crypto could not be regarded as ‘real money.’ Crypto’s reputation, it seems, fluctuates as much as its price.
Below we’ve charted the top five cryptocurrencies (by market cap) over the course of the last five years. While we may not be able to make sense of their behaviour in absolute terms, the cryptocurrency story thus far has been nothing if not captivating.
