Cryptocurrency Markets

Cryptocurrency Markets

Since the launch of Bitcoin in 2009, the total value of the overall cryptocurrencies market has since reached a value of around $150 billion. That is currently the total market value of the 10 biggest cryptocurrencies now in circulation. While there are a total of almost 900 different cryptocurrencies now in circulation, most of them have limited value and adoption is limited to a very narrow group of users. Almost two-thirds of the total market value of the ‘big 10’ cryptocurrencies are accounted for by $100 billion+ value of the Bitcoin currently in circulation, which equates to a market share of around 58%. It should be noted that the volatility in adoption rates and values of different cryptocurrencies means that these figures are very fluid.

Ethereum, the second most widely adopted cryptocurrency, has a total market capitalization of around $30 billion. While Bitcoin was created purely as a currency, or financial settlement network to be used for payments, Ethereum is, rather, an open source platform for the creation of smart contracts. Ether, the cryptocurrency units of the Ethereum platform, are used to pay for the creation and use of the smart contracts built on the platform.

Ripple, the third largest cryptocurrency again has a different character is an open source payments system designed to be used to settle fiat currency transactions in a decentralized way using blockchain and cutting out the need for financial services companies as intermediaries.

Currently, cryptocurrencies, including Bitcoin, are used more as a store of value, like digital gold, than a currency used to buy real-world goods and services. Bitcoin is the frontrunner in terms of being used in a way we would traditionally understand as a ‘currency’. There is a network of companies selling products and services which do accept Bitcoin as payment, and smaller networks of vendors that will also accept other cryptocurrencies such as Litecoin and Dash.

Somewhere in the region of 325,000 Bitcoin transactions are made on average per day. Ethereum transactions (currency units are called Ethers) show higher volume, at around 550,000 as it used less as a store of value, or hoarded, and more for its core function of paying for use of the smart contract platform.

However, the network of vendors accepting cryptocurrency payments is growing. Big names such as Microsoft, Paypal and online travel booking site Expedia now accepting Bitcoin payments demonstrate the growth of the supporting infrastructure that cryptocurrency advocates hope will eventually lead to widespread use as a medium for payment – ‘true’ currencies.

The future for cryptocurrency markets is hard to predict. One school of thought believes that Bitcoin’s more likely future, at present, is more like a digital equivalent to gold than a currency commonly used to pay for goods and services. Another is that the current tendency towards ‘hoarding’ of Bitcoin and other cryptocurrencies as a speculative investment in the hope that future that widespread adoption will lead to huge increases in value is a natural stage in the development of cryptocurrency markets. As the market matures price growth should, in theory, stabilize and see the value of cryptocurrencies fluctuate within a similar range to traditional fiat currencies. Hoarding as a speculative long-term investment would then lose its appeal and see cryptocurrencies being spent like fiat currencies.

The recent decision by Chicago-based CME Group, the world’s largest futures and commodities exchange, to start offering futures contracts on Bitcoin demonstrates that cryptocurrency markets are now becoming integrated with the wider financial system. Canadian investment bank Canaccord Genuity recently released a white paper on cryptocurrency markets, positing that it expects their value to increase by around x1000 between 2017 and 2025. Bitcoin’s total market capitalisation will, the bank believes, have reached around $500 billion by then, around 5 times its current value. The recent decision by Chicago-based CME Group, the world’s largest futures and commodities exchange, to start offering futures contracts on Bitcoin demonstrates that cryptocurrency markets are now becoming integrated with the wider financial system. Canadian investment bank Canaccord Genuity recently released a white paper on cryptocurrency markets, positing that it expects their value to increase by around x1000 between 2017 and 2025. Bitcoin’s total market capitalisation will, the bank believes, have reached around $500 billion by then, around 5 times its current value.

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