Cryptocurrency is one of the most exciting emerging technological fields. And it’s almost entirely speculation.
Yes, distributed ledger blockchain technology is a world-changing innovation with plenty of practical use. Right now, however, most of its use is market speculation. There is a collection of random businesses using one of the many crypto tokens for occasional novelty sales, and sure, plenty of companies have been built entirely around leveraging digital currency’s advantages. They are, however, minor compared to the droves of exchanges and speculators looking to throw money around to make a quick buck in the crypto lottery.
It’s madness in the crypto markets
Have you checked the cryptocurrency markets lately? It’s chaos. Formerly “safe” coins taking large hits, lesser-known coins seemingly coming out of nowhere into the top 10 rankings overnight, nearly abandoned projects having their day in the sun. It’s an exciting time to be a speculative trader, that’s for sure. Those trying to learn the landscape of an important technology of the future, however, will have more of a rough time developing meaningful knowledge of the more important projects that will have a lasting impact.
Illogical trading confuses investors and developers
Money talks, and investment drives innovation. Capital influx sends a market signal to project developers: “You’re doing the right thing, keep it up.” Other investors take note of where the money is going and back successful projects. The snag happens when speculators start throwing money into whichever coin their Wheel of Pump-and-Dump landed on after their most recent vigorous spin. Investors seeing all that cash going to a project think something good must be happening and follow suit. Developers, who might have given up on the project for legitimate reasons, see all this money as an indicator that they should pick it back up. When these market signals are random and speculative, savvy investors and grounded developers can tell, and stay above the hype. However, they’re few and far between, and the pack of low information actors follow the crypto roulette wherever it goes.
Volatility diminishes stability, a must for business
While all these wild swings in the crypto trading world can be fun and exciting, they aren’t exactly conducive to lasting commerce. Businesses incur significant risk, startup costs, hard work, etc. on a carefully calculated equation of profitability, such that even a 5 cent price increase at a local coffee shop represents a whole host of solvency factors. When cryptocurrency is employed for a business model, these wild swings in price, confirmation times, and transaction costs can prove deadly. While traders are playing with fun money, they’re also playing with the hopes and dreams of those who invested their whole lives into a shot at entrepreneurship.
Ultimately, pure speculation is an important phase
Complain though we might, in the end all this is a step that the emerging field of digital currency must undertake. Speculative mania represents growing excitement and interest, and some of that random capital influx will invariably fall on important projects and recruit new users, developers, and investors who otherwise would have had no interest in the field. Perhaps as importantly, when an unsustainable bubble pops, it punishes bad investment and reveals which projects had viability to begin with, reorienting the market around more solid ventures. The end result is a field of more and better-educated investors, combined with solid technologies that have weathered the storm of fierce competition and rise and crash. That’s a win for crypto as a whole.