In this week, we examine yet another price high and the likelihood that BTC will continue to rise in value, despite the world’s most famous cryptocurrency ending down for the first week in as long as we can remember. We look at the federal government’s new initiative to impact the development of new cryptocurrencies, discuss what it means for the old ones, and celebrate bitcoin’s overtaking of PayPal in market capitalization value, despite the event being short-lived.
BTC Reaches New Highs but Ends Week Lower
For the first week in what seems like forever, bitcoin finally ended on a down note, starting at about $4100 on August 14th and finishing at $3970 on August 21st. During this period, it managed to climb above $4500 before quickly dropping back down in price. The continued incoming, bold predictions of analysts suggest that the 3% drop is likely just investor profit-taking and not the beginning of the end of the “bitcoin bubble.” Rival BTC clone Bitcoin Cash (BCH) also managed to steal the show for a while, climbing above $900 in price, thanks to relatively tremendous profits seen by BCH miners and a continued propulsion of media interest.
Factors keeping money in bitcoin and preventing it from dropping too much are thought to include the recent activation of SegWit (as discussed in previous roundups), Wall Street’s embrace of the cryptocurrency as a legitimate financial instrument, as well as a general public acceptance that bitcoin is here to stay. Over the course of an almost 8-year lifespan, the open-sourced yet impenetrable design of bitcoin has proven itself to be a legitimate store of value. Hackers continue to chip away at cryptocurrency users, finding ever-more sophisticated and clever ways of stealing funds, but bitcoin itself remains un-hackable, and therefore trustworthy, at least in the eyes of some very major financial players.
Federal Regulation of Cryptocurrency Imminent
U.S. legislators are aiming to introduce a bill that will mark the beginning of a new era of cryptocurrency regulation, making it one of the first countries worldwide to do so. While the bill will push for compliance with anti-money laundering (AML) standards for future cryptocurrencies, it also aims to guarantee freedom from overt government interference with and taxation of AML-compliant cryptocurrencies. The motivation for future coin developers to integrate AML standards and practices into their code is also part of the bill: in exchange for making their coin more transparent and easy to determine who the senders and receivers are, AML-compliant cryptocurrencies will be free from potential government crackdowns and future regulations.
Bitcoin AML compliance is perhaps the newest way that startup companies are capitalizing on the cryptocurrency space. By reassuring investors, watchdog groups or the federal government alike that their bitcoin did not come (directly) from illicit sources, exchanges, wallets and other related service providers can have a leg up on the competition, should the day come that such regulations are actually imposed on the industry. Merchant and customer protection programs are also on the rise, hoping to reduce the risk of fraud in cryptocurrency in an effort to provide assurances to those wishing to transact in bitcoin without the potential of losing money.
Bitcoin Worth More Than PayPal?
Amazingly, the market capitalization value of bitcoin surpassed that of payment processor giant PayPal for a brief period of time earlier this week, reaching $74 billion as compared to PayPal’s $71 billion. The “market cap” of a cryptocurrency, company or other publicly traded asset is simply a formula and can be calculated by multiplying the total number of coins or shares in existence by its current price. This gives an estimated sense of how “big” a coin or company really is, even though one is decentralized and unregulated and the other very centralized and regulated. While Ethereum is slowly approaching the market cap of bitcoin (it was at a little less than 45% of bitcoin’s market cap as of the writing of this article), bitcoin’s meteoric rise this year briefly propelled its total value past that of PayPal’s; a feat that few saw coming and even fewer expected would actually happen.
Bitcoin critics may be quick to point out that it is not exactly fair or necessarily reasonable to compare the market capitalization of a cryptocurrency and a corporation. After all, PayPal is a for-profit company run by a tight-knit group of executives whose main interests include profit and long-term survival, while bitcoin is not a company in any sense of the word but simply a tool used to move wealth via a digital format. Nevertheless, bitcoin has long been regarded as a rival to PayPal by the media and its community, because it is ultimately trying to accomplish the same goals of secured money storage and transfer, without the associated and sometimes costly third party element.
Also in the News
- The Huffington Post published an article exploring 10 of the most popular online BTC wallets – yet another symbolic act that signifies bitcoin has made it to the mainstream. As more and more online content providers are embracing cryptocurrency in an attempt to draw new readers, the idea of cryptocurrency becomes more entrenched in the mind of the public, helping to pave the way for widespread adoption. Huffpo also made recent claims that every business is at risk of being disrupted by a decentralized version of itself, a concept that already holds some truth to it.
- A new, non-minable cryptocurrency based on the idea of “the internet of things” sprang up to #5 in terms of market cap in the list of all coins, according to coinmarketcap.com. Barely a month old, IOTA saw serious gains over the last week, surpassing long-lived titans Litecoin and Dash. The new coin is luring new investors through promises of no fees and a high degree of scalability, but it is yet to be seen if it can sustain this kind of traction in the long term.
- Despite certain departments within the federal government wanting to clamp down on cryptocurrency in the name of combatting terrorism and fraud, the Pentagon released a memo last week stating that it is exploring the employment of blockchain technology in cybersecurity measures in order to help the Department of Defense develop more robust methods of combatting cyber-attacks. The first test will be creation of a blockchain-driven encrypted messaging service thought to be impenetrable to foreign attacks.