Bitcoin is up over 60% on the year, and positive signals continue to pour in. This big experiment appears to be moving in one direction, and one direction only; mainstream adoption – but it will not happen overnight. Here are some developments that speak to the advance of Bitcoin. But first, please excuse me while I escort a big elephant out of the room, as its presence has a way of obfuscating real progress.
The price of bitcoin has tumbled from its $20,000 high, to the $5,700 level recently. How can we possibly celebrate this as a success? Simple – we step back and see it for what it was, an expected bubble fueled by exuberant speculation that was bound to burst. The price of bitcoin was due to decouple from fantasy, and the bubble may still be deflating. Let’s not forget that Bitcoin is an experiment. What we are witnessing is market forces gradually anchoring the price of bitcoin to fundamental indicators of perceived value. Bitcoin simply will not die, because – if necessary – support will swing in and pull it from the brink to ensure that it remains viable to deliver on its unique utility value. Bitcoin is worth saving because the opportunity cost is too high.
Marginal Cost Support
One such indicator is the cost at which infrastructure supporters (miners) will consider the rewards of mining bitcoin too low to continue their investments in support of the network. Most recently, Coinshare published a whitepaper investigating the marginal cost of creating bitcoin, and concluded that as of May 2018, the cost was $6,400. At the time of this writing, Coinmarketcap was listing bitcoin at $6,521. As new more efficient mining equipment and renewable energy continue to drive the marginal cost even lower, and some miners opt to take short-term losses to support what they believe to be an ecosystem with a promising future, we can expect to see support at even lower price points. The fact is that support of the infrastructure has not waned; it is simply evolving into a more efficient one.
Bitcoin Dominance
Coinmarketcap is tracking over 1,800 cryptoassets. This list includes a great number of cryptocurrencies that will simply not gain any traction. Some projects were initiated with great fanfare but lacked substance to remain viable. The current shakeout is disproportionately erasing value from these projects vis-a-vis bitcoin, as witnessed by bitcoin’s growing market dominance which stands at 51.3% at the time of this writing – as tracked by coinmarketcap.com. Not only does Bitcoin continue to maintain support at the infrastructure level, it is also asserting itself as the dominant cryptocurrency. But there is more, the success of bitcoin continues to be driven by current and future use cases.
Trading On A Regulated Exchange
One of the more recent developments involve the introduction of bitcoin trading through a regulated stock exchange – slated to commence before the end of 2018. Canadian Fintech company Blockstation recently announced that Jamaica Stock Exchange had selected the company as its partner to facilitate trading, settlement, and clearance of blockchain tokens for broker-dealers and clients. Blockstation employes Chainwatch – a blockchain monitoring solution – to ensure compliance with AML regulations. The technology claims to determine if the source of deposits are illicit, and it enables deep analysis of token history – which includes details of illicit transactions associated with deposited tokens.
We are only scratching the surface. The road ahead will be long and arduous, the breakthroughs many, and the direction will be unwavering toward wider acceptance of bitcoin.