The sharp drop of Bitcoin early this year lowers its price, but not its value. The crypto currencies stand for a decentralized financial system and a world hungry for experiments. Is the bubble bursting now? It seems that many financial experts breathe a sigh of relief. Finally, what they’ve been predicting is happening. Bitcoin and the other crypto currencies drop to the value they are entitled to: zero. Since December 2017, the Bitcoin price has dropped by more than 50%.
Volatility of cryptocurrency markets
Many other coins have also been smashed. The search for reasons is desperate, pointing e.g. to bans in Korea or to the Chinese New Year, at which investments are traditionally converted into cash to buy gifts. But not too fast! Is it really a bubble bursting right now? Last year there was an impressive rally in crypto currencies. All traffic lights were green all year round. It just went up and up. At the end of the year, anyone who had earlier bought Ether for the relatively small amount of 250 euros, for example, could look forward to the value of a luxury holiday in the Caribbean. This attracted many non-experts and adventurers to the crypto market.
This is also one reason why the crypto market is so volatile, opaque and difficult to predict. Because a colourful mixture of tech freaks, gamblers and true believers have come together. Some want fast money, others believe in the value of the coins. But what exactly is the value of Bitcoins and Ether? Do these things even have any real value?
Bankers and investment gurus like Warren Buffet say no. In other words, there is nothing -in their mind- that makes these digital currencies valuable.
Hey Warren: The value of companies like Twitter, Telegram or Google were also difficult to determine in the early days. And btw. your friend Bill has a different opinion 😉
Many fans, on the other hand, see the realistic value of a bitcoin close to a million dollars. In this case, there is still some upside potential. But where should this value come from, and what are the real obstacles to Bitcoin? The value of companies like Twitter, Telegram or Google were also difficult to determine in the early days. Digital business models, networks and exponential growth were new, and experts were uncertain about the evaluation.
Assessing the value of cryptocurrencies and their future potential
The situation is similar for cryptocurrencies, tokens and coins. The price is available on a daily basis on the internet. But what is their real value? There are a few factors that can determine this value. Behind most digital currencies, for example, is a network model. The more people participate in this network, the greater the value gets.
Another important factor for determining the value is the secondary industry, which now actively uses crypto currencies. Here we can see that there are more and more start-ups using the blockchain.
What about the purposes for cryptocurrencies? We live in a digitalized world. The number of applications for decentralized digital money will increase exponentially. Business models based on blockchain technology are being added almost on a daily basis. In addition, large banks are now also entering the business.
All this could be described as the true value of crypto currencies. Investors should urgently check whether the coin of their desire lives up to this value concept. Of course, there are also coins or tokens that do not have this kind of value and are more suitable as vehicles for gamblers.
But unless there is a global economic crisis or similarly devastating conditions, the value of Bitcoin, Litecoin or Ether is expected to rise again in the near future. In any case, their actual value has not fallen as a result of the current drop in prices. It’s only the price.
The idea behind virtual currencies, in particular, has a massiv value. Anyone with a smartphone and internet access can participate in this financial system of the future -today and worldwide. Even if they live in a country that bans cryptocurrencies.