Now that the cryptocurrency world is well established on a glide path into the trough of disillusionment, it’s time to reflect on what that means. First of all, it means the hype that “Bitcoin will replace ___________” (fill in the blank with your favorite entity/item that Bitcoin was supposed to bring an end to) has died down. It also means that the hype surrounding the blockchain (again, fill in the blank for what it might replace) is also coming to grips with real world applications and limitations.
In the ashes of the trough of disillusionment, hundreds, if not thousands of start-up projects will fail. Scammers will be sent packing. These are necessary and good things which will give birth to an environment that will produce solutions based on reality instead of hype.
Fresh innovation will spring from the newly discovered zone of reality. Limitations will be solved, or new iterations of distributed ledger technology and cryptocurrencies will move the sector onto a new plane. The mad scramble of cool ideas backed by easy money will settle into a rhythm of building systems that are not just viable to launch (most ICOs), but are sustainable over the long-term.
That means a whole lot of people who were in their venture capital/ICO funded silos will have to emerge and form partnerships to, as we wrote about in February, begin the real work. We won’t see the full fruit of these partnerships for months, if not years. Google, Netflix, and Apple did not arise from the 2001 tech bust in 2002. Or 2003. Or 2004.
Furthermore, the world at the time was ready for tech giants to emerge. We’re not so sure that is the case in 2018. When it comes to something as important as money and monetary systems, it appears that the people of the world are not going to be satisfied with the big banks absorbing and monopolizing financial technology.
More likely is that over the coming years, we will witness the birth and baby steps of a new monetary eco-system. It will begin as an awkward dance with the existing national currency systems. Friction will grow between those feeding this new system and those interested in maintaining their monopolies. However, like the internet in 2000, new and exciting ways to imagine the future of money have been unleashed.
That genie is not going back in the bottle.
2017 was a quiet year for the price of silver and gold. As the new monetary eco-system begins to take shape, we anticipate the price of gold and silver to become more volatile, albeit with an upward bias. As much as some of the crypto die-hards want to believe, the emerging monetary eco-system is not yet ready to be dominated by electronic digits as a store of value. We say “yet” because it still could happen someday… After the wild west is tamed by a period of harsh reality and new concepts of what money can be are more widely adopted.
Silver and gold bullion will continue to play a vital role in whatever emerges. That could take the form of crypto backing. Or, it could take the form of precious metals taking on more of a role as a store of value, and less as a medium of exchange. Financial technology does enable the mind-bending concept of separating those monetary functions into distinct monetary items. But that is a subject for another post.