The cryptocurrency bubble was, as it turns out, short lived. After a dramatic correction through the beginning of 2018, the cryptocurrency market has rebounded and seen steady growth over the past month. There is, however, one major difference: its trajectory is much flatter and more stable than last year's fourth quarter explosion.
More volatile then other asset classes
Now, before we go any further, yes, it's true that Bitcoin and other cryptocurrencies remain significantly more volatile than many other assets. Nolan Bauerle, head of research at CoinDesk, said the element of volatility is in part due to the nature of Bitcoin as an always-trading asset.
"Sudden spikes or dips are a feature of the super liquid, global, never-ending trade day for Bitcoin," Bauerle said. "It would be difficult to count that type of behavior out. The sophisticated traders who learned the ebbs and flows of the Bitcoin market also have better and better infrastructure to use and even more complex markets surrounding the asset class, so it remains within the realm of the possible that things could swing again."
However, it's also true that since the major correction, Bitcoin trends have been significantly more stable, hovering between $7,000 and $9,300 for more than a month. Compared with the wild fluctuations we saw in December, this trend appears to suggest that cryptocurrency is finding its balance.
The early days of the digital economy
Many participants are treating cryptocurrency as a speculative investment, artificially pumping up the values of various coins. This ultimately sends them crashing down to Earth when investors sell off their coins en masse, sometimes intentionally. Unfortunately, this speculative behavior has undermined the promise of the digital economy: speedy transactions worldwide without high fees charged by middlemen. However, that future is well on its way, and it is that promise that will drive the true value of the digital economy.
"The digital economy is still developing and, as such, is finding its true value," said Serge Beck, CEO of global fintech company Optherium. "It will take time, but as cryptocurrencies and blockchain-based solutions with real value emerge, the economy will stabilize. Those that provide real value will rise to the top, while non-solutions will fall by the wayside."
Sustained growth in the long run
So, yes, in the short term the speculative rollercoaster ride might continue, albeit without such steep hills and valleys as before. In the long run, though, we will see sustained growth in the crypto markets. That's not to say every coin on the market will reap the growth -- only those that offer true value will come out on top -- but the digital economy is here to stay, and the currencies that position themselves properly will continue to grow in value.
"Especially in the ICO space, we hope that companies will provide more value to the market," said John Slyusarev, CMO for ICORating. "We hope that companies that completed their ICOs in 2017 and Q1 2018 develop their product quickly, and start to deliver better value to the market as well as many more factors to help their investors make well-thought-out decisions about their tokens."
Even further, Slyusarev said he expects the crypto market to normalize and begin looking like other industries, institutional capital and all.
"In general, our view is that the market will grow largely because of the increasing flow of institutional capital, because regulation has enabled the largest traditional players, including billion-dollar hedge funds and iconic Wall Street banks, to feel more comfortable in the ICO and crypto space," Slyusareve said.
Only time will tell exactly what will happen, but one thing is for sure: cryptocurrency isn't going away any time soon.