Blockchain: The Case For Long-Term Bullish Sentiment

Investing, Opinion | June 27, 2019 By:

It’s easy to get caught in the constant volatility of the crypto market. Numbers go up. Everyone celebrates. Numbers go down. Everyone capitulates. But understanding the long-term market sentiment around crypto, and measuring the progress of the crypto development, is slightly more difficult. Most investors, institutions and even a good portion of market traders are not as concerned with short-term chart action. Crypto and blockchain technology investment is a long-term play. It’s a bet on the future. And although we often see publications parrot the fanfare or despair of market shifts, behind the scenes, blockchain miners, developers and investors generally have a more holistic vision.

As a crypto financial institution, BabelFinance gets to sample perspectives from hedge managers, investors, miners, funds and more. In general, hopes are high. Those who have traversed the blockchain ecosystem since 2009 are battle-tested, and even those with relatively new experience seem to share a commitment to long-term ideals. In truth, blockchain is polarizing. Those who are “in” have fallen down the rabbit hole and maintain unshakeable faith. Opposition tends to be equally stubborn.

But the faithful have reason to believe blockchain will prevail; it’s not blind faith. Investment, development and progress continues, often on the back of these three pillar beliefs:

1) Short-term crypto concerns will not kill blockchain.

Outsiders often have a difficult time conceptualizing the in’s and out’s of crypto. With shifting regulation, we often hear about geo-political struggles with crypto regulation mixed with speculation on how new rules will impact prices. Frankly speaking, blockchain is a global technology. If one geographic region attempts to snuff out the innovation, projects will move to more welcoming areas. The idea of crypto won’t die with regulation, hacks or otherwise.

That said, BabelFinance is in a unique position as a globally distributed company (entities in HK, The Cayman Islands, The British Virgin Islands, Singapore, and soon to add more) staffed by those of Chinese nationality. There is always concern about what superpowers like China, U.S., Europe, Russia, etc. will do with regards to market sentiment. Despite tightening global regulation, the appetite for crypto is ever-present – even growing! In just under a year, we issued $124 million in crypto-backed loans with almost $40 million worth of loans issued in the past few weeks. We issued these loans to projects and miners building infrastructure, crypto investors betting on the future bull-runs and hedge managers diversifying their portfolios. Of course, these numbers are small against the backdrop of a trillion-dollar market space. But from where we are sitting, interest from miners and speculators is a good sign.

Sure, we haven’t worked out all the problems with cryptocurrency, regulation or security. But that doesn’t detract from the technology’s potential. And that potential has attracted some of the brightest minds and most savvy investors to the space. That speaks volumes to the future of blockchain.

2) Blockchain growth and development has a pattern.

Enthusiasm for crypto is volcanic. It can remain dormant for months or years and then erupt in a fiery display of market action.

In 2009, Bitcoin hit the market with an approximate value of $.0007. By July 12, 2010, the price had already reached $.008 (an increase of 1043%) and within ten day ballooned to $.08. The bull-run continued at breakneck speeds till July 2011 at the top of the “first bubble” when Bitcoin hit $31. Then, the bubble popped. Bitcoin crashed to $2 in just five months, erasing profits from many of the early-speculators. The first bear market lasted over a year and by December 2012, the Bitcoin price had only recovered to $12. Then, a gradual swell of the market action carried Bitcoin through 2013. The crescendo of value painted another perfect bull-run up to $266 in April, followed by another crash to $100 in June.

This pattern repeated again and again, almost in perfect succession over the coming years. At the end of 2013, Bitcoin hit more than $1000 dollars. Then, another bear market controlled the price until the end of 2017, when the price topped out at almost $20,000.

Now, Bitcoin is closing in on two years of bear market, and investors, developers and miners are undeterred. They’ve seen this market action before and, in their minds, it’s more of the same.

With each bull-run there is more than just price patterns occupying public interest. Another latent pattern sits behind the obvious bubbling of speculative interest. Drawn initially to the price, or clued in by close friends, more and more crypto enthusiasts have joined the fray from 2009 to now.

Each market boom is paralleled by interest in Bitcoin’s underlying technology – blockchain. More developers, more technologists and more visionaries add to the expanding army of blockchain supporters. And more people bring diverse perspectives, enhance and contribute to blockchain code and offer more innovations and use cases for blockchain. Bitcoin’s (or other blockchain’s) compounding interest isn’t just about price action; it’s the compound interest of talent that really drives the ecosystem.

3) Blockchain infrastructure is key … and it’s getting stronger.

 “It has been 10 years!” Fudsters cry out. “Where is the value?”

When blockchain novices review cryptocurrencies for the first time, it’s easy to understand their hesitation. Has Bitcoin become a global and efficient payment network? Not really. Not yet.

But the fear associated with what appears to be slow mainstream adoption and progression of cryptocurrencies is often rooted in a lack of understanding. The sheer magnitude of what blockchains are trying to accomplish is no small feat.

This isn’t an application, or hardware, or basic technology upgrade to existing infrastructure. Blockchain is a complete restructure of data management and a new approach to digital object scarcity and ownership.

Essentially, blockchain had to take a 30-year step backwards to rethink how interconnected systems work. Imagine re-inventing the internet in 10 years’ time and having it run as smoothly as modern tech. In truth, it’s amazing how far we’ve progressed in such a short amount of time.

Consider the internet, payment systems, and other computer systems as technical debt. Developers will tell you that building on legacy systems can be a nightmare due to the tangle of old code crafted by early engineers that didn’t understand the more efficient or better ways to do things.

Blockchain technology takes many concepts of data sharing back to stage 1 and rearchitects interconnected networks with a modern understanding of how humans and computers transact.

That said, blockchain infrastructure has boomed to a global phenomenon over the past few years. Now, there are blockchain miners, validators and other network participants in virtually every corner of the world. In the past year alone, the number of blockchain related projects has exploded. We even have schools and programs dedicated to teaching blockchain to future developers. Companies like Facebook, JPMorgan, IBM, Microsoft, Salesforce and many, many more have thrown resources into the ring.

And with this vast expanding and strengthening infrastructure… how can anyone doubt that blockchain has a future?