The digital currency market is becoming ever more complicated with splits, new contenders and uncertainty in the short to medium term. While there is no doubt that digital currencies are here to stay, this uncertainty will impact its adoption by businesses. Those who follow the market will be aware that on 1 August we saw bitcoin effectively split in two with the creation of bitcoin cash. As uncertainty continues with regards another restructuring for bitcoin later this year, ethereum has emerged as a new favourite.
Phenomenal returns
On Monday afternoon ethereum was trading 10% higher at $330 after earlier hitting $347.05. This is a 70% increase on the month and a 4000% increase on the year. It would appear that investors are starting to refocus on more “stable” digital currencies. That said, bitcoin may have been down 1% at $4055.88, more than 10% of its all-time high of $4522.13, but it is still up 40% in the month of August and has more than quadrupled since the start of 2017.
It would appear that investors are now focusing upon a further split in bitcoin schedule for November which will see the emergence of SegWit2x. This comes just after the split we highlighted above which saw the introduction of bitcoin cash. Trading figures suggest that ethereum is extremely popular in South Korea and news that online trading company IG will “support” trading of ethereum was yet another feather in the digital currency’s cap. Again, to add confusion to the market ethereum is currently working on a proposal known as “Metropolis” which will likely be released over the next few weeks, improving transaction privacy and trade efficiency.
Money-laundering
While there is no doubt that digital currencies, in whatever form, are here to stay, governments around the world will be concerned about money-laundering and privacy issues. Many will remember the recent NHS hack where ransoms were demanded in bitcoins to reinstate effected computer systems. The emergence of the digital currencies comes at a time when governments and regulators around the world have spent significant money, time and effort fighting money-laundering and transparency. When you bear in mind that transaction privacy is for many perhaps the more appealing element of digital currencies we could be taking a step backwards?
Survival of the fittest
While bitcoin, in its numerous current and future states, is by far and away the best known digital currency there are other contenders to the throne. The next few years will see a significant battle in this particular area with survival of the fittest the natural progression. One of the keys to success for any digital currency is its adoption by traders and trading platforms around the world. However, double-digit fluctuations on a monthly basis cannot continue because traders and businesses require stability going forward.
It will be interesting to see how this particular market develops and whether new digital currencies emerge to take advantage of lessons learned in the past. Many people will find it difficult to understand the basis for valuing a digital currency because it is not based on any one economy or an underlying asset such as gold. Whatever happens there will be interesting times ahead for the digital currency market!