As we watch the interesting action in the Ethereum price and prices of other Cryptocurrencies in general for the last few weeks, one can’t help but wonder if this is a bubble and what it would take to see Cryptocurrencies and Ethereum’s price up trending again.
The answer to that question is actually simple: It’s all about value. Ethereum’s intrinsic value will keep on rising as demand keeps picking up and the “bubble” will burst when there is no demand or value for users and investors. When compared to other Cryptocurrencies, Ethereum has a competitive edge because it offers both the Cryptocurrency and the Technology.
How do we measure the demand (current and future)? Now that’s when the answer becomes more complex.
In this article, we will cover 3 facets:
Facet #1 – Ethereum’s market shares versus other Cryptocurrencies
The chart is self explanatory. Ethereum is gaining market shares as money is flowing into it. If this fast pace continues, we might see Ethereum reaching $1000 in 2018 based on the updated forecast made by the Investing Haven Research Team after their first price target of $550 was achieved. We might even see Ethereum exceeding Bitcoin’s market cap by the end of 2017.
Facet #2 – Investment demand
Although the demand from investors is still at early stages, the very select few that can trade or invest in Cryptocurrencies are injecting substantial amounts in this market.
The main institutional demands for Cryptocurrencies remain the investment trusts launched by Grayscale offering investors investment exposure to Bitcoin and Ethereum through the Bitcoin Investment trust and as of April 2017, The Ethereum Investment trust (ETC).
Another large investment demand could happen if the highly anticipated Ethereum and Bitcoin ETFs are approved by the SEC. We are still waiting for the decision on that one. If the ETFs are approved, it should trigger a substantial increase in value for both Ethereum and Bitcoin.
Last but not least, the demand from private investors trading or investing in Cryptocurrencies through the different exchanges is growing. This is another group where we foresee a huge increase in demand as the process to invest in Cryptocurrencies gets simplified. The main challenge for these investors so far is transferring the funds from their bank accounts to the exchange and the delays to do so. Demand will likely boom as more and more banks simplify this type of transactions for their clients and reduce the time it takes to do so.
Facet #3 – Ethereum’s potential to transform financial transactions
The potential is definitely there, and major players are betting on it. One can simply take a look at the members of the Enterprise Ethereum Alliance to see how many Fortune 500 companies have committed to exploring the untapped potential Ethereum has to offer especially for financial institutions.
For financial institutions, one of the Key drivers for customer satisfaction is the “Ease of doing business”. In the age of smart payments and busy lifestyles where work hours are not the conventional Monday to Friday 9 to 5 anymore, clients want to do everything on their smart phone. Ethereum’s smart contracts could simplify transactions that require a trip to the bank or the notary today..
They can also revolutionize the way money will be transferred in the very near future. Here is a good example:
Boston based Circle internet’s international money transfer service is built on Ethereum and is now offering Free instant money transfers locally and internationally. In fact, Jeremy Allaire, Circles’ CEO and founder sums it up pretty well when he says, “When’s the last time you sent a ‘cross-border email? … The idea of cross-border payments is going to completely go away.” That is a glimpse of the potential transformation Ethereum can bring to the world of finance. It is worth noting that Circle is funded by Goldman Sachs Group and Baidu, signaling more innovations down the road.
Ethereum has increased more than 5000% since January 2017 so it is reasonable to expect high volatility. There will probably be other exchanges crashing as we evolve towards more stable and mature platforms. There will be corrections such as the one we are seeing right now with Ethereum dropping more that 50% from its June 2017 highs. But is the Cryptocurrency Bubble about to burst? Not anytime soon, as long as there is value driven demand, which makes it anything but a bubble.