A perspective on the cryptocurrency market growth outlook.

Many people in the cryptocurrency space are hoping, praying that the next bull run is starting up again. As of April 23rd, the cryptocurrency market cap has returned to 400 billion from the low of 243 billion at the start of this month. The 65% increase in less that a month definitely feels like a bull run, but in the wild west cryptocurrency world it is not unusual. I have my doubts that this will transition to a large bull run. I believe in cryptocurrencie’s potential to grow and change the world more than most, but there are a few things that have to happen before the next parabolic advance.

There are still a few big issues that need to be worked out before the next big bull run that compares to the 2017 or 2013 bull runs. The first is the infrastructure around cryptocurrency. During the peak of 2017’s bull run in December, the infrastructure started to shake. Coinbase couldn’t keep up with the number of new accounts being created, much less the buy and sell orders that flowed in with each new account. The exchanges I use were struggling to accept buy and sell orders. There were periods of days where I couldn’t execute any buy or sell order because all the exchanges were swamped with orders. The transaction fees of bitcoin, ethereum and other cryptocurrencies hit record highs. The time it took to settle a transaction on most blockchains has never been longer. The infrastructure of bank to cryptocurrency intermediaries, cryptocurrency exchanges, and the cryptocurrencies themselves will all need to be upgraded in order to support the activity that accompanies the next big bull run.

The money to fund these upgrades has already been raised with the last bull run. Even after falling 70% from cryptocurrencies all time high, the overall market cap is 1500% higher that it was a year ago. The bottle neck is be the number of developers working on the infrastructure. With the initial coin offering(ICO) boom in 2017, there are now more that 1500 different cryptocurrency projects out there. This spreads the developers thin. It will take time for all of the needed upgrades to be made, on the order of years.

Another big issue is all the scams that came along on the bull run. Bitconnect had risen to the top 20 cryptocurrencies during the 2017 boom, but has since been found to be a ponzi scheme. There are many cryptocurrencies out there with sketchy backgrounds. Tether has been criticized a lot for never completing an audit. Tether’s website claims to be tied to the US Dollar and to have 1 dollar in their bank account for every tether created. They had been promising to complete an audit for over a year and eventually even fired the company that was supposed to do the audit. All the while tether had been creating exponentially more tokens, to the point that some even speculated that tether was single handedly keeping the bull run going. This doesn’t built confidence in the cryptocurrency and the US government has now even issued Tether a subpoena. All the questionable cryptocurrencies out there will create sell pressure as they are exposed because they will create fear, uncertainty and doubt. A bear market will be healthy for the cryptocurrency ecosystem because it will help flush out weak cryptocurrencies, and expose scams that thrive in a growing market. This purging may also take years to complete.

The last issue I will mention, and perhaps the most uncharted issue is government regulation. Before 2017’s bull run, many people recognized that government regulation was a risk to cryptocurrency but at that time the market cap was small enough that most governments paid little attention to it. In 2017 there was more money raised in ICOs than in IPOs. The market cap of cryptocurrencies grew enough to almost be measured in trillions instead of billions. People were making crazy amounts of money and loosing crazy amounts of money. All this has caught the eye of governments all around the world. China has banned ICOs while Japan has made Bitcoin legal tender. The inconsistency in regulations will be a big challenge going forward for all cryptocurrencies. The will take years or decades for governments to resolve their stance on cryptocurrencies and the impact is impossible to predict. Will governments eventually accept cryptocurrencies? How will governments enforce any rules they make when most of the cryptocurrencies are decentralized and there is no person or corporation for the government to hold accountable? Will governments try to make their own cyrptocurrenies and try to make everyone switch to their platforms?

In conclusion, I do believe cryptocurrenies will grow to new all time highs and possibly even by orders of magnitude higher. Just not tomorrow, or next month or next year. There were 4 years between the last 2 parabolic advances. We will likely have to wait at least 4 years for the next.