You have surely heard of cryptocurrency prices through Bitcoin, which was widely publicized at the end of 2017 when its price reached 20,000 dollars! With Bitcoin, we are entering a new era, a new type of currency is created. Beyond the Bitcoin price, it is interesting to understand the blockchain technology on which these cryptocurrencies are based. It is also interesting to have a global vision on the cryptocurrency ecosystem which is very broad today, since we are talking about thousands of different cryptocurrency prices on the market!
So what are cryptocurrency prices, exactly? What about from an institutional perspective? What cryptocurrency prices must one monitor in 2019 in order to make a successful investment?
Let us observe these different points together so that you can watch the prices of the different cryptocurrencies with all the keys to understanding in hand.
What are cryptocurrencies exactly?
Emergence of the concept of cryptocurrency with Bitcoin
The concept of cryptocurrency first appeared with Bitcoin in 2008, presented by Satoshi Nakamoto, a very mysterious character in the cryptocurrency community because we do not know his real identity to date.
This famous Satoshi therefore presented the concept of Bitcoin in a white paper where he demonstrates a desire to free himself from the grip of international financial institutions, in particular banks and States which exercise control over all financial transactions through the world. However, these institutions do not offer an efficient service, particularly in terms of speed and transaction costs.
After the 2008 financial crisis, Bitcoin therefore appears to be the adequate solution. It allows, via a cryptographic digital currency, to shift the trust of users, initially contained in the hands of financial institutions towards an unstoppable cryptographic technological process that cannot be lacking.
The main problem that the Bitcoin protocol solves through blockchain technology is notably that of double value. Indeed, via internet, when you send an attachment in an e-mail for example you send a copy of your part. However, it is of course not possible to send a copy of a silver coin. Bitcoin therefore allows, via blockchain, to make a single transfer without double creation and as such represents a revolution in the world of digital transactions. Many observers see this as a revolution to match the creation of the internet in terms of the information sharing revolution.
Evolution of the cryptocurrency ecosystem
The cryptocurrency price ecosystem is not limited today to Bitcoin Price, there are thousands of cryptocurrency prices. These new currencies, although they are called cryptocurrencies, are not all intended for financial transfers.
The Ethereum project, now the second cryptocurrency on the market in terms of capitalization, is not intended to be a currency. Thanks to its market value, its main role will be to encourage network nodes to validate transactions.
The cryptocurrency revolution therefore goes far beyond the financial sphere. All sectors of the economy inducing transactions can be disrupted by a blockchain project that operates independently, thanks to the financial incentive of network-linked cryptocurrency.
For example, Solarcoin makes it possible to operate a blockchain intended for the direct sharing of solar energy between users and without intermediaries.
Blockchain, a technological breakthrough on which cryptocurrencies are based
Cryptocurrencies are based on blockchain technology, let’s see in a few points what are the operating characteristics of this technology in order to better understand what is behind the concept.
How a blockchain works:
Any public blockchain necessarily works with a programmable currency or token. Bitcoin is an example of a programmable currency.
Transactions between network users are grouped in blocks. Each block is validated by network nodes called “miners”, according to techniques which depend on the type of Blockchain. In the Bitcoin Blockchain this technique is called “Proof-of-Work”, proof of work, and consists in solving algorithmic problems.
Once the block is validated, it is time stamped and added to the block chain. The transaction is then visible to the receiver and the entire network.
The 3 properties of the Blockchain: disintermediation, security, autonomy
Disintermediation: The technology and transparent operation of the Blockchain produces the confidence necessary for user agents to carry out exchanges (monetary, property and others) without the control of a trusted third party (bank, notary).
Security : The decentralized architecture and the block code guarantee the inviolability of information. Security is ensured by 2 mechanisms: a cryptographic process: the code of each block is linked to the code of the one preceding it, the modification of a block would involve the modification of the whole chain.
Then, the decentralized aspect involves a replica of all the blocks in each node of the network, this avoids the risk of data loss.
Autonomy: The creation of a cryptocurrency pays for infrastructure costs. Indeed, the computing power and the hosting space are provided by the nodes of the network.
The “miners” who operate blockchain transactions, provide hardware, computing power and storage space, in exchange for which they receive cryptocurrency prices.
“Smarts contracts”, an opportunity for the development of cryptocurrencies
These “smart contracts” are stand-alone programs that automatically execute the terms and conditions of a contract, without requiring human intervention once started.
Smart contracts work like any conditional instruction of type “if – then” (“If” condition checked “Then” consequence is executed), and have three main benefits: increased speed, better efficiency and certainty that the contract will be executed as agreed. These programs are capable of overcoming moral hazard problems and reducing the costs of verification, enforcement, arbitration and fraud.
Their role is to perform operations according to instructions fully auditable by the parties to these contracts, ensuring unbiased execution, since all the contributors on the network verify that no one has been able to modify the program and the virtual machine. Ethereum that performs it. These contracts may be triggered from the validation of conditions, which may depend on other computer programs, or even other contracts.
This type of automated contract would, for example, create an insurance blockchain that works with smart contracts that would release funds when all of the conditions are met. We can also think about the use of these smart contracts in relation to IoTs, thus making it possible to create, for example, an Airbnb blockchain linked to smart doors which unlock automatically when the conditions of the smart contract are met on the blockchain.
Institutionalization of cryptocurrencies in 2019
Even if the primary goal of cryptocurrencies is to free themselves from international institutions through decentralized networks, the movement has grown to such an extent that the governments of certain countries have started to regulate around this subject.
Christine Lagarde, Director of the IMF, calls for caution with regard to cryptocurrencies, in particular because of the possibilities of money laundering and illegal activities which could use these cryptocurrency prices to carry out undrawn exchanges in the classical system .
There are no international regulations regarding cryptocurrency prices to date. The G20 discussed the subject at their last meeting in Argentina, but to date there have been no international measures.
However, at state level, regulations exist:
In China, cryptocurrency exchanges are illegal as well as ICOs (Initial coin offering) these bans have very negative effects on the price of cryptocurrencies. Despite these bans, China remains an essential country when we talk about cryptocurrency mining, mining is the action of validation of transactions which requires a large computing force as well as a lot of energy, the low price of energy in China making this activity very profitable.
In the United States, cryptocurrencies do not have legal status, but they are not prohibited. American financial institutions do not recognize the Bitcoin Price as a currency but as a financial asset. It is in the United States that investment funds including investments in bitcoin have emerged.
In France, the State Council announced in 2018 that it considered cryptocurrencies as movable property, thus creating a tax on the sales of these active crypto.
Other countries like Malta and Estonia see blockchain and cryptocurrency exchanges as opportunities to attract players to their economies. They have also implemented flexible legislation around cryptocurrency prices, which explains the presence of many trading platforms registered in Malta.
Observers believe that the future of adopting cryptocurrencies will essentially depend on the regulations that are put in place. We must therefore carefully study the developments in these regulations and their effects on the price of cryptocurrencies.
ETF, what is it and what impact do they have on cryptocurrencies?
ETFs, Exchange Traded funds, are financial products that create an index around one or more assets. ETFs are traded on national stock exchanges in countries. The first ETF based on the Bitcoin Price asset was accepted by the Swedish stock exchange in 2015.
In the United States, several requests for the creation of an ETF based on the Bitcoin Price have been filed with the SEC (Securities and Exchange Commission), the institution that regulates the financial markets in the United States. The SEC has yet to agree.
A global adoption of ETFs would be an important opportunity for the price of cryptocurrencies. Indeed, by making them accessible on conventional stock markets, it is quite possible to predict an increase in cryptocurrency prices due to the large and easy influx of investors.
One of the limits of cryptocurrency prices lies in their highly volatile nature. Volatility means that the price of cryptocurrencies is very variable due to numerous speculations and announcement effects. The most striking example is the Bitcoin price: while it was not even worth a dollar when it was created, it reached a few 20,000 dollars a few years later before falling to around 4,000 dollars today.
To address this volatility problem, “Stable corners” have emerged. As their name suggests, they are inherently stable thanks to indexing mechanisms. This is the case, for example, with the Theter (USDT), a dollar-indexed cryptocurrency. This cryptocurrency thus makes it possible to fluidify the exchanges in which the dollar cannot be integrated.
However, if we observe the original Bitcoin algorithm, bitcoin monetary creation follows a decreasing function reaching its end around 2140, this aiming to smooth the price of bitcoin in the long term. So even if cryptocurrency prices are currently very volatile, their long-term stabilization can be predicted and would have positive effects on the market.
Which cryptocurrencies to watch in 2019?
In 2019, it will be necessary to monitor the cryptocurrencies with the largest capitalizations on the market in order to understand the trends of a market influenced by variations in the Bitcoin price. The recent breakthrough of Binance Coin, created in 2017, is now among the most important cryptocurrencies. This dazzling arrival makes it a course to watch with particular attention.
Bitcoin is the first cryptocurrency, it was created and validated following the white paper by Satoshi Nakamoto published in 2008: ” Bitcoin, a Peer to Peer Electronic Cash System ” Bitcoin is a decentralized cryptocurrency based on blockchain technology to manage transactions and issue digital coins (Tokens) without resorting to a central authority (such as a bank or PayPal). Bitcoin is also the first use of blockchain technology which demonstrates the potential for disruption of the international monetary and banking system.
The Ethereum network project was presented in a white paper published in 2013 by its founder, Vitalik Buterin. The Ethereum network was designed with the aim of offering an open and decentralized blockchain platform that will allow all developers to create applications using in particular the concept of “Smart Contract”. This is why we generally refer to the Ethereum project as a global computer project open to everyone. Ethereum is therefore not only a cryptocurrency but a blockchain network allowing to realize many applications. However, the Ethereum network issues a cryptocurrency to reward the nodes of the network, which is called Ether and is symbolized by the three letters ETH on exchange platforms.
The EOS project intends to compete with the Ethereum project by offering a public Blockchain to support the development of decentralized applications and to develop the use of smart contracts. EOS is based on very advantageous technical characteristics with in particular a possibility of carrying out 300,000 transactions per second against 15 for Ethereum and 7 for Bitcoin.
Originally introduced in 2012, it is a real-time payment system. It aims to replace the current international payment system called SWIFT, itself in place since the 1970s. Unlike Bitcoin, Ripple does not wish to revolutionize the international monetary system but to offer a platform to facilitate international banking exchanges.
Ripple is a cryptocurrency issued by the company of the same name and which appears under the name “XRP” X designating a non-national currency and RP designating Ripple.
Litecoin is a cryptocurrency based on Bitcoin blockchain technology. In other words, Litecoin is an improvement on Bitcoin. Litecoin is represented by the letters LTC on the various exchange platforms.
Binance coin is the cryptocurrency linked to the Binance exchange platform. Binance was created with an ICO (Initial coin offering) which raised 100 million Binance coins sold for $ 0.1 each, placing the Binance ICO as one of the largest to date. The letters BNB characterize the Binance cryptocurrency on the Binance platform but also on other types of exchanges.