Table of Contents:
- 1. Introduction
- 2. Capitalization of crypto amounting at 200 billion dollars even possible?
- 3. Are Vitalik’s forecasts regarding cryptocurrencies negative?
- 4. CEO Binance believes that thousand-fold increases are possible
- 5. Summary
In recent days the CEO of Binance Changpeng Zhao and the co-creator of Ethereum Vitalik Buterik, shared quite interesting thoughts. They speculated about the possibilities of acquiring thousand-fold increases on the market of cryptocurrencies. Is it possible?
On 8 August, Buterin shared his own thoughts to the public news regarding the future of cryptocurrencies. According to him, in spite of previous increases amounting at thousands of percentages, it is impossible for the market capitalization to achieve the same increases from the current value of 200 milliard dollars.
Capitalization of crypto amounting at 200 billion dollars even possible?
Thousand-fold increase from 200 milliard dollars would mean that the value of the market would be 200 billion dollars, what constitutes of 70% of global wealth. This sum includes gold, fiat currencies, and other traditional assets.
“The blockchain space approaches the point, where we can see the ceiling. If you talk to an average educated person, they have heard about the blockchain technology at least once. There’s no opportunity for another thousand-fold increase in this area”.
Taking into account the context and the Buterin’s statement regarding the increase of awareness about cryptocurrencies, the message seems obvious. Although it is possible for the decentralized applications (DApps) to reach thousand-fold increase in activity and the number of users, it is not realistic for the cryptocurrency valuation to exceed USD 200 billion in the near future.
Are Vitalik’s forecasts regarding cryptocurrencies negative?
On the other hand, sensational headlines and posts from social media misled many members of cryptocurrency communities. They caused many people to misinterpret Buterin’s statement as a pessimistic approach to the future of cryptocurrency sector. Many people begin to refer to the Buterin’s statement, so he published an explanation: “To be clear, I never said that there is "no room for growth" in the crypto ecosystem. I said there is no room for *1000x price increases*. A 1000x price increase from today means $200T in crypto, or ~an entire 70% of today's global wealth being in crypto. What I *actually* said is that, because large portions of the population have already heard of crypto, further growth of crypto in any sense must come from *depth* (i.e. actual usage), and not bringing in more attention”.
Buterin’s point of view regarding long-term development of cryptocurrency market is quite literal because undoubtedly difficult would be for cryptocurrencies to represent such significant majority of world wealth. It would require the full change of banking system. The investors with investments in traditional assets such as gold, would have to switch to cryptocurrencies and make them the basic way of storing value.
Instead of expecting unrealistic growths, Buterin suggests to focus on DApps development and protocols in order to increase the utilization of systems based on a blockchain. Currently, most people – both on developed cryptocurrency markets such as USA and Japan, as well as developing markets of countries like India and China – is already aware of cryptocurrencies and blockchain technologies. Another phase of Blockchain growth may require the move of trend of centralized platforms on decentralized alternatives. It will be a challenge, among others due to the current discrepancy in performance between centralized and decentralized services.
CEO Binance believes that thousand-fold increases are possible
Changpeng Zhao, CEO of Binance, the biggest cryptocurrency exchange, said that a thousand-fold increase in relation to the current market valuation is absolutely possible. He presents unwaveringly optimistic forecasts regarding the future trend of this market.
He said that 200 billion dollars may seem to be unrealistic sum when compared to the actual, traditional financial market. However, just like we compare the taxi industry with the size of Uber services, he explained that the wrong approach is to measure the potential of cryptocurrency market with the traditional financial market.
“I still disagree with this. I will say ‘crypto will absolutely grow 1000x and more!’ Just reaching USD market cap will give it close to 1000x. That’s just one currency with severely restricted use case, and the derivatives market is so much bigger. You also can't use traditional market size to measure potential for new technologies or industries. If you used (and people have) taxi market size to estimate Uber's potential, you would be off by quite a bit.”
In Changpeng Zhao’s argument, it is underlined that the potential of cryptocurrencies cannot be measured based on the size of traditional financial market. Over the last year, the biggest cryptocurrency companies, like Coinbase, Gemini, and BitGo, has worked on creating solutions that will draw institutional investors to this area. While anticipating the inflow of investors from traditional financial sectors, one needs to refer to the traditional financial market in order to measure the potential size of cryptocurrency market.
Furthermore, as Eytro Voorhees, the chairman of ShapeShift said, global finances are being increasingly integrated with cryptocurrencies. The cryptocurrency sector still creates bridges that connects both markets, so they will influence each other in both negative and positive ways.
Summary - Cryptocurrencies and blockchain are much more than just money
As Changpeng Zhao pointed out, it is also important to admit that money is one of many applications of blockchain technology. Venture capital companies and head investors such as Ben Horowitz consider blockchain technology and protocols such as Ethereum as new, global systems.
Bitcoin, Ethereum, and other main cryptocurrencies that were accepted as means of payments, have also many different alternative applications. Ether, for example, can power the platform for smart contacts which, provided enough scaling by implementation of Sharding and Plasma, can compete with centralized servers and computer systems in the long run.
To sum up, when considering the possibilities of growth of cryptocurrency market and the blockchain, one needs to remember that their applications go much further than in case of standard financial methods. The enormity of applications of blockchain technology certainly creates space for huge gains. How large they will be? It all depends on the method how developers will implement decentralized technologies to everyday uses.