In 2017, Bitcoin enjoyed a historic and unprecedented price run, as its value increased from $900 to $20,000 in just 12 months. Towards the end of this run, the number of daily Bitcoin transactions also peaked, reaching 490,644 on December 17th last year.
Given the volatile nature of cryptocurrency as an asset class and these unusual levels of trading activity, it stands to reason that the value and popularity of Bitcoin should have declined slightly during 2018.
Still, few could have anticipated just how far the price of Bitcoin would fall in the last nine months, with a decline of nearly 80% leaving values hovering around the £5,000 mark.
The rate at which Bitcoin’s price has fallen has sparked considerable concern among investors, causing many to suggest that the market leading cryptocurrency represents the next big bubble. We’ll address this in the article below, while asking whether crypto-assets such as Ripple are well-placed to survive this.
Does the Bitcoin Bubble Really Exist?
The financial market has seen numerous bubbles in the digital age, from the 2008 subprime mortgage crash in the U.S. to the dot.com boom and bust of the 1990s.
Such bubbles are typically characterized by a significant surge in price that sees assets achieve a disproportionately high value. This is followed by significant depreciation, as the value of these assets fall to more realistic levels and the surrounding market begins to collapse.
The only issue when applying this logic to Bitcoin is that it remains impossible to assess the true value of this asset. This is a critical limitation to understand, particularly when attempting to define the presence of a bubble and whether or not Bitcoin is trading at a sustainable level.
Regardless, there’s no doubt that this asset has experienced an incredible rise and a damaging fall during the course of the last 18 months, and while Bitcoin has yet to crash the loose definition of a bubble can definitely be applied here.
Why Ripple and Other Crypto-Assets are Capable of Surviving the Bubble
Despite the tumbling value of Bitcoin, the demand among investors remains strong. This has much to do with the fact that this asset holds intrinsic value within the cryptocurrency market, while it has recently seen its market dominance increase beyond the 50% mark despite its falling price.
Not only this, but Bitcoin’s value has fallen at a slower rate than a host of alternative cryptocurrencies, with Ethereum having declined by more than 30% in recent times and Ripple apparently primed for a staggering 97% crash over the course of the next five years.
Despite this, there’s a sense that these assets boast longer-term value in the eyes of both institutional and individual investors. The reason for this is that they’re classed as crypto assets rather than currencies, meaning that they offer more diverse and sustainable value across an array of different applications.
In the case of Ripple, this is also a centralized coin, and one that is likely to resist the fall-out from the Bitcoin bubble. It has certainly captured the attention of investment firms and wealth management entities, with Wellington Management having announced in March that it will incorporate crypto assets of this type into a host of selected portfolios.
Ripple has also been accepted by a host of global banks, who are keen on leveraging its advanced software solutions to improve the efficiency of record keeping and financial transactions. This ties into the notion that while banks remain skeptical of Bitcoin and digital currencies, they’ve already begun to embrace crypto assets and software with open arms.
The Last Word
While the presence of a Bitcoin bubble can be debated on a couple of technicalities, there’s no doubt that the recent rise and fall of this asset could precipitate a market collapse.
While this would impact negatively on competing cryptocurrencies, diverse and centralized crypto assets such as Ripple are far better placed to survive the bubble.
So regardless of recent price trends, the long-term outlook suggests that assets such as Ripple could well survive and supersede Bitcoin in the eyes of investors.