The sudden breakout in Bitcoin prices last week, the highest since early December, have seen analysts rallying behind the positive climb, with many viewing the bounce as the long-awaited return to an impending bull run. The rise is not solely reserved for Bitcoin as alt coins too take a leap forward, Messari reports.
While the nascent market has weathered through many storms as of late, enduring the harsh crypto winter, industry insiders are now cautiously hopeful, reflecting the warming market sentiment as a whole.
Xinshu Dong, CEO and Co-Founder of Zilliqa, a high-throughput blockchain platform, joins LeapRate today to give us his expert opinion on Bitcoin’s price and the cryptosphere.
LR: Amid the Bitcoin turbulence, is the recent sudden breakout in prices welcome news for blockchain startups accustomed to navigating an environment of uncertainty or will this eventually pan out to be a false spring?
Xinshu: The blockchain space is very different from other existing industries. Both an emerging technology and a new financial instrument, the crypto market has captured the interest of those from traditional financial backgrounds as much as those approaching the industry as developers and engineers. That said, from a financial perspective, it’s crucial to remember that the crypto market is very different from the traditional stock market––as a whole, we’re operating within an inherently volatile space.
For those operating within the space, when cryptocurrencies are in the green, it’s always going to be pleasant. Whether we like it or not, irrespective of the significant strides that have been made on the technological front, perceptions of the industry are often guided by market sentiment. For the past few years, we’ve been able to see that greater excitement and enthusiasm for the technology is often associated with market sentiment as well. There has been more interest in blockchain applications and solutions when sentiments are more positive.
However, I would say that for projects to thrive, it’s important that they focus on the fundamentals. Prices are one thing, but the technology is something else entirely. The latter has the power to create real changes in the world.
LR: Does the myopic focus on price continue to hinder crypto’s entrance into mainstream finance?
Xinshu: In any currency, fiat or otherwise, stability is a key component that drives wider use. Take the Venezuelan bolívar, for example, which has been plagued by hyperinflation to the extent that it is of little value in the country, with citizens relying on foreign currencies such as the U.S. dollar or the Colombian peso instead. A tireless oscillation between high and low prices would deter anyone from using the currency as an instrument of exchange on a daily basis, because it’s simply unreliable. With that in mind, cryptocurrencies are in a unique position as they have the ability to wield widespread effects across a global economy. For years, cryptocurrencies have been treated as a speculative asset, where day traders have played the market, making quick gains as they sell their tokens at a profit. Admittedly, it’s difficult for most people to move away from this mindset today.
Moreover, with its global impact, there needs to be better regulatory alignment between countries to provide greater guidance on how cryptocurrencies should be treated as financial instruments. Over time, we’ve come to see some regulatory frameworks emerge from critical jurisdictions such as Switzerland, Hong Kong, Singapore, and the United States, encouraging greater participation from institutional investors and traditional financial institutions in the space.
On a large scale, the entrance of cryptocurrencies into mainstream finance will also largely be determined by the quality of today’s blockchain infrastructures. Current blockchain protocols are nowhere near ready to support a nation’s economy. Scalability remains a key concern ten years on, as projects work to enable networks that can process as many transactions as today’s legacy payment processors are able to do. As such, whether it’s by virtue of a lack of technological maturity or concerns over its long-term viability, different regulatory bodies will approach crypto with varying levels of trepidation as they seek to integrate or diminish its use within their local economies.
LR: Give us your thoughts on the broader implications of the market’s unexpected surge, as well as the knock-on effects for the underlying technologies.
Xinshu: A surge in prices certainly has the ability to shape public perception outside of the cryptosphere. For those on the outside looking in, it injects greater confidence into the wider blockchain space, asserting that for years, we’ve not been building for naught. While for fledgling projects in the space that are in the process of raising funds, a positive atmosphere serves to instill confidence in their community, as they look to the longevity of their investments.
I would argue however, that one of the benefits of the bear market was that it served as a necessary cooling period, where the industry was able to weed out bad actors and perhaps ill-intentioned projects simply seeking out quick wins rather than contributing to the industry ecosystem. No longer resting on the hype, projects that prevailed did so because they were driven to carry on in the hopes of enabling a truly decentralised future. These projects sought to make meaningful technological advancements in the space, working to drive mainstream adoption and develop real-life use cases across a variety of industries. Skepticism notwithstanding, perhaps this surge in prices will instill a renewed vigour in those looking to enter the industry. Years on, blockchain will have enormous potential, though mainstream adoption is still far ahead, albeit, on the horizon.
LR: Could you provide an insider perspective on surviving the past two years in crypto: extreme market movements, regulatory changes, and the race to innovate?
Xinshu: In spite of Bitcoin’s tumble from the $20,000 mark since December 2017, those who have been ardent believers in blockchain’s potential from the start have helped advance the technology irrespective of valuations. From the perspective of a blockchain project rather than an investor, the past two years has required a great deal of conviction in the technology we’re engaging with. Since our launch, we made a point of applying prudent financial practices to ensure that we’d be able to weather market fluctuations, allowing us to develop our core platform while still driving adoption.
That said, our main focus since we embarked on this journey in the summer of 2017, has always been on the technology. Despite the crypto winter, we’ve been able to deliver on our promises to our community and to ourselves, as we looked to expand our presence to the European market and grow our team in anticipation of new partnerships and projects. We successfully deployed our mainnet network in January of this year and launched a new blockchain education initiative in March, all while developing strategic partnerships across a variety of industries in order to develop use cases. For us, we’ve seen that whether it’s a bearish market or a bullish market, whether sentiments are positive or negative––such factors haven’t impacted our commitment and our progress in any way.
Upon reflecting on the past two years, I can see that the projects that have excelled are those who operated with a sound guiding strategy in mind, whether it’s building up their developer community, looking to enterprise partnerships, or bolstering their tech infrastructure. Moving forward, I think there needs to be more of a concerted effort in focusing on the future––though the industry benefits from the myriad of projects working on infrastructure as much as decentralised applications, we need to work together. More needs to be done as we look at equipping the next-generation of talent with the necessary resources for a lifetime where blockchain use will be widespread. We should also be working actively with legislators and institutions to provide much-needed clarity to the technology to guide their regulatory and implementation efforts.
LR: According to technical analyst Todd Butterfield, the bitcoin price is likely to gradually climb to the $7,000 resistance level in the months to come, possibly by the end of May. The analyst presented positive indicators shown by Elliot Waves, which show that with several minor retracements and small rallies, the asset is en route to reach the $7,000 mark by the second quarter of 2019. What is your prediction?
Xinshu: In such a nascent and volatile industry, market analysts and observers have little data to go on to make such price predictions. I would rather monitor the technology itself––the innovation, the adoption, and the impact. In addition, as the cryptocurrency space works towards attaining greater maturity and global regulatory clarity follows suit, my hope is that the crypto market’s bursts of volatility will one day be a thing of the past.