Throughout most of July 2018, bitcoin has been on a price bull run. A Forbes report revealed how its climbed from roughly $6,300 (HK$49,449.08) to around $8,400 (HK $65,932.86) in just a couple of weeks. However, recent pricing data also reveals that this surge could be over as bitcoin then slumped by 5% by the end of July, bringing it below the coveted $8,000 (HK $62,792.48) mark. As of August 3, 2018, its value has dropped to around $7,350 (HK $57,690.59).
Now, other cryptocurrencies are following suit. While bitcoin suffered a 5% drop, Ethereum has been down by around 6%, and Ripple by 4%. Experts identify several reasons for what’s starting to look like a nosedive for the most successful cryptocurrencies in the world market.
For one, the blockchain technology that makes cryptocurrency trading possible is reportedly being tested by known financial software giants. Both IBM and currency trading utility CLS have shown interest in Ledger Connect, a blockchain-based application that offers services from various vendors, including financial institutions Citigroup and Barclays. This means that fiat currency institutions are adapting to using the very software that makes Bitcoin and other cryptos attractive to investors.
This comes on the heels of the news last May that Saudi Arabia’s Ministry of Communications and Information Technology has been considering adapting blockchain technology for the country’s financial dealings. The so-called “blockchain bootcamp” is aimed at developing a decentralised ledger software and applying it to traditional financial transactions, as well as using it for the transfer of asset deals between the Middle East and the rest of the world. Early this year, the Saudi Arabian Monetary Authority had already made a deal with Ripple to design a system for making international payments more convenient. These recent moves are likely to save the country billions in traditional banking costs.
Furthermore, in the US, cryptocurrency mining is raising concerns over the sheer power requirements involved in the process. The small city of Plattsburgh, New York, which sits on the US-Canada border reveals the underlying costs of crypto mining. As Plattsburgh mayor Colin Read explains, “The resident hobbyists are no problem… But when out-of-towners noticed cheap rates just as Bitcoin prices began to spike they flocked here. Currently, 15 per cent of our power supply is used by the large Bitcoin operations – which pushes us over the city’s quota on cold winter days.” This puts the city in a precarious state of having to buy power elsewhere just to meet local demands – a 30 to 50% increase in what Plattsburgh spends for electricity.
All of these concerns naturally point to the question of which businesses and retailers will still be accepting bitcoins and other cryptocurrencies in the foreseeable future. Several countries with considerable impact on the global financial market actually have mixed reactions to the crypto boom. Meanwhile, despite the uncertainty in the values of the top five cryptocurrencies, FXCM reveals that certain corporations are scheduled to accept Bitcoin by 2019. McDonald’s, Amazon, Walmart, Argos, and British Airways have all confirmed that they will start accepting online Bitcoin payments some time next year.
In conclusion, it might not be accurate to say that Bitcoin is on its last legs. If it’s any indication of the future of crypto, Apple’s Steve Wozniak so far stands by his statement that bitcoin might one day become the sole global currency. At the same time, these recent developments could point to what many tech pioneers have been saying for years: the future may not be in cryptocurrency, but the blockchain technology that makes it all possible.