Cryptocurrency Market Size and Technology
- The market cap of Bitcoin exceeded $70 billion, with peak trading volumes around $3 billion per day.
- Technology consulting firm CB Insights has identified 27 ways blockchain can fundamentally change processes as diverse as banking, cybersecurity, voting, and academics.
- The World Economic Forum estimates that by 2027, 10% of global GDP will be stored on blockchain technology.
- Most mining pools are located in China, comprising more than 70% of total Bitcoin mining. China manufactures most cryptocurrency mining equipment and leverages the country’s cheap electricity prices.
Types of Cryptocurrencies
- There are over 1,000 cryptocurrencies in existence right now (called “altcoins”); over 600 have market capitalizations of over $100,000.
- Bitcoin’s market share has fallen from 81% in June 2016 to 41% one year later, in June 2017. However, Bitcoin’s price has continued to soar.
- In August 2017, Ether’s market capitalization was around $28 billion. At one point, commentatorsanticipated that Ether’s market capitalization would surpass that of Bitcoin (the “flippening“). However, issues with Ethereum technology have since caused its value to decline.
Investing in Cryptocurrencies
- Supply and demand matters. The rate of increase of the supply of Bitcoin will decrease until the number of Bitcoin reaches 21 million, which is expected to take place in the year 2140. Similarly, the supply of Litecoin will be capped at 84 million units.
- Initial coin offerings are trending right now. This year, former Mozilla CEO Brendan Eich raised $35 million from an ICO in less than 30 seconds, and Bancor Protocol raised $153 million in under three hours.
- Blockchain-related projects have raised more than $1.6 billion via ICOs to date, while venture capitalists have provided only $550 million for cryptocurrency companies.
- Accounting. While the US has been cracking down on unregulated activities, in countries such as Germany and the UK, cryptocurrencies are treated like “private money” and are not subject to tax outside of commercial use.
- Regulation. New York State created the BitLicense system, mandates for companies before conducting business with New York residents. As of mid-2017, only three BitLicenses have been issued, and a far greater number withdrawn or denied. In 2015, the cost of obtaining a license was estimated to be as much as $100,000.
- Security. The FTC recorded an increase in identity fraud complaints of more than 100% between 2013 and 2016, and Coinbase, the largest US-based exchange, saw account hacking double just between November and December 2016.