Cryptomania!

What a wild ride in cryptos this week! After hitting a peak of just over $20,000 on December 17, Bitcoin fell nearly 40% within a week. Turns out that was just the warm-up. After bouncing around between $13,000 and $17,500 (a huge percentage range over just a three week time period), on January 16th, Bitcoin shed 33% of its value in 36 hours.

Some other cryptos fared worse. Ethereum plunged 40% during the same bloodbath. But then what happened? Over the next three days (at the time of this writing), the crypto complex rose 20%.

Are these investments? No. They are speculations verging on gambling.

Is this money? Absolutely not!

What is it then?

Back in November, I wrote an article entitled “Cryptos are Reaching a Crisis of Confidence.” In it, I quoted Arthur Brock, a well respected crypto commentator. He said very plainly…

“…let’s tell the truth — cryptocurrencies just aren’t safe for everyday use by normal people and businesses yet.”

Yep. This week pretty well confirmed that.

What we are seeing is an unregulated wild west market that has a lot of growing to do.  It is going to be more important than ever to get your game face on, avoid the hype surrounding ICOs, and make wise decisions about what to invest in within the crypto space – if anything right now.  The good news is that all this craziness is going to make people look a lot closer at the technologies underlying the various cryptos.

The Crypto Evolution

Keep this in mind. Bitcoin is crypto 1.0. That means it was the technology that introduced a new concept into the world. Not just a new product – but a whole new way of thinking about a given market. In this case, the market is money (or better yet – how to exchange value). Version 1.0 of anything isn’t that great. In marketing, we call it the MVP – minimum viable product. Something that can help people, but far from what it can become.

Ethereum and smart contracts are crypto 2.0.  They bring tremendous enhancements and value to the crypto market. For example, you can now make money “smart” by literally programming in a value system that it will promote (more on that in my Reset course). There is a LOT of development in this space right now.

However, there are still major challenges.  Ethereum is working to solve the immense problems of scalability and energy consumption of the blockchain model.  They are making headway. But as the raw math and physics are applied to scaling the model, serious questions remain when considering adding billions of devices and trillions of transactions as the Internet of Things (IoT) continues to develop.  It is not a given that the blockchain, as it is now designed and implemented, can scale to meet that demand.

I was in Philadelphia last week speaking at an event about the biblical principles that should be applied to money for it to be sustainable and ethical. While there I was able to reconnect with a friend I met two years ago at a conference in Canada. We had several very interesting discussions to say the least. He is well out front in the emerging world of crypto 3.0.

This is where companies like Holo and Hashgraph are taking distributed technology to a whole new level. They appear to have solved the issue of scaleability by moving transaction processing to a personal ledger system hosted on your phone or computer vs. a distributed ledger system that accounts for all transactions and hosted on tens of thousands of nodes worldwide. Interesting concept to say the least…  Time will tell. I’m now watching it very closely.

One thing is certain. The future of money is going to be an exciting one. But as this week has shown, be careful wading through these waters.  A new system of money will emerge that will serve humanity well if we are smart, patient, and avoid cryptomania.