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January 2, 2018

Over 1,300 cryptocurrencies have net market capitalisation of over $587 billion

National

January 2, 2018

LAHORE: Over 1,300 cryptocurrencies like the famous Bitcoin, used primarily outside existing international banking and governmental institutions and exchanged over the internet in the developed Western world, are on a roll —with their total market capitalization estimated to be over $587 billion.

While quoting Peter Smith, CEO of digital wallet platform Blockchain, a December 17, 2017 edition of the CNBC – an American basic cable, internet and satellite business news television channel – had stated: “The total value of all cryptocurrencies in the world will hit $1 trillion in 2018, the CEO of one of the world's largest digital wallet platforms told CNBC. There are over 1,300 cryptocurrencies in the world such as Bitcoin and Ether with the total market capitalization totalling over $587 billion, according to data from industry website ‘Coinmarketcap.”

The reputed American media house, which was available to approximately 93.62 million pay television households (80.4 per cent of households with television) in the United States, had further reported: “Bitcoin accounts for over 50 per cent of the total cryptocurrency market cap. It is worth around $317 billion. Ether is the second-largest digital currency with a market cap of $68.9 billion. Both have had huge price rallies this year. Some market players think Bitcoin alone will be worth $1 trillion in the near future. Ronnie Moas, the founder of Standpoint Research, told CNBC that Bitcoin could be valued as high as $4, 00,000 per digital coin, with a market cap eventually reaching $1 trillion. However, Bitcoin has also received its fair share of criticism. JPMorgan’s Jamie Dimon famously called the cryptocurrency a “fraud” calling people who invest in it "stupid". And Deutsche Bank recently warned that a Bitcoin crash could pose a risk to the broader financial market next year.”

According to Bloomberg, a privately-held financial software, data, and media firm headquartered in New York, cryptocurrencies are a valuable investment, and people have been very attracted to the gains taking place this year.

For instance, demand has driven Bitcoin’s market cap to be more prominent than the $45 billion art market these days. However, it still has a long way to go as larger global investment markets overshadow digital currencies quite a bit. For instance investments in residential real estate capture around $162 trillion.

Bloomberg, which earned revenues of $9 billion a few years ago with 192 offices worldwide, had maintained that the global gold market was about $6-9 trillion annually, which was gigantic compared to the 0.3 trillion in cryptocurrency market capitalizations.

Research shows that Bitcoin came to the world back in January of 2009, and following its birth, other cryptocurrencies were born during the early days like litecoin, mastercoin, feathercoin, and peercoin. Now there are 1,323 different cryptocurrencies that have created a significantly large market capitalization.

Research reports of Switzerland’s Fribourg School of Management and a globally-acclaimed American business magazine “Forbes” have shown that although these alternative and decentralized modes of exchange are in the early stages of development, they seemingly have the potential to challenge existing systems of currency and payments in not-so-distant future.

While Japan and South Korea have become dominant trading arenas for various digital currencies, and the yen and the won have commanded the world’s crypto-trade volumes month after month this year, with the Yen becoming the number one currency by volume worldwide as far as Bitcoin was concerned and South Korea commanding the most Bitcoin cash volume, these digital currencies are being discussed in neighbouring India too.

Just a couple of days ago, the Indian finance ministry said Cryptocurrencies like Bitcoin were 'Ponzi schemes.’ By definition, a Ponzi scheme is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading.

A report by the London-based Reuters news agency had quoted the Indian Finance Ministry as saying: “There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes. There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes, with investors risking a sudden and prolonged crash.”

The report by Reuters, a 167-year old international news agency, had read: “The Indian Finance Ministry cautioned investors about the risks of trading in cryptocurrencies such as Bitcoin, saying digital currency investments are like "Ponzi schemes." Cryptocurrencies are not legal tender and have no regulatory permission or protection in the country, the finance ministry said in a statement, but stopped short of announcing an outright ban or imposing any curbs.”

It had viewed: “A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors. The ministry also cautioned that encrypted transactions in cryptocurrency were likely being used for illegal activities such as "terror-funding, smuggling, drug trafficking and other money laundering acts." India currently has no regulation for cryptocurrencies, and like other global policymakers, it is seeking to understand how to supervise a market that many feel is a speculative bubble.”

The afore-cited Reuters report had further said: “Last week, India's capital market regulator said it was in talks with the government and central bank on how to regulate cryptocurrencies. Bitcoin, the world's biggest and best-known cryptocurrency, has gained more than 19-fold this year. Digital currencies are very popular across Asia, with many retail investors giving up their daily jobs to trade them full time in countries such as Japan and South Korea, which together make up for more than half the global trading volumes by some estimates.”

Meanwhile, a fairly recent December 29, 2017 report of the CNBC had maintained: “Bitcoin remains the largest digital currency by far. It has a market capitalization of roughly $247 billion, accounting for about 41 percent of the total cryptocurrency market cap tracked by CoinMarketCap. Ripple accounted for about 12.5 percent, while Ethereum was around 12.1 percent, the website showed.”

The American media house added: “Officially called XRP, the Ripple climbed 55.9 percent to a record high of $2.23 Friday afternoon, according to CoinMarketCap. The digital currency had a market cap of $86.3 billion, surpassing Ethereum's $73 billion, according to the website.”

A December 29, 2017 report of the Forbes had viewed: “Although Bitcoin was launched as the only cryptocurrency in the world back in 2009, there are now thousands of alternatives that can be traded on various online exchanges. Many cryptocurrency traders track the price of these digital assets on sites like CoinMarketCap.com, but the key metric that is most often used to compare these cryptocurrencies, market cap, can sometimes be misleading. Having said that, there are a few alternative metrics that can be used to compare the different digital assets found in the world today.”

According to the December 19, 2017 edition of Business Insider, an American financial and business news website that also operates internationally, other cryptocurrencies with market capitalizations above $1 billion include Dash ($6.66 billion), NEM ($4.96 billion), Monero ($4.68 billion), Bitcoin Gold ($ 4.43 billion), Ethereum Classic (3.15B), Cardano ($3.09), EOS ($3.02 billion) Stellar Lumens ($2.60 billion), NEO ($2.53 billion), BitConnect ($1.86 billion), Populous ($1.59 billion), Waves ($1.37 billion), Zcash ($1.05 billion), Qtum ($1.04 billion), OmiseGO ($1.04 billion) and Lisk ($1.03 billion).

Legal status of cryptocurrencies:

According to the Forbes Magazine and American stock exchange NASDAQ (National Association of Securities Dealers Automated Quotations), which is the second-biggest bourse in the world by market capitalization in excess of US$ 9,585 billion, the legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them.

While some countries have explicitly allowed their use and trade, others have banned or restricted it. Likewise, various government agencies, departments, and courts have classified Bitcoins differently.

For example, China Central Bank had banned the handling of Bitcoins by financial institutions in the country during an extremely fast adoption period in early 2014. In Russia, where cryptocurrencies are otherwise legal, it is illegal to actually purchase goods with any currency other than the Russian Ruble.

Research shows that in March 2014, the United States Internal Revenue Service had ruled that Bitcoin would be treated as property for tax purposes as opposed to currency, which thus meant that this virtual currency was being made subject to capital gain tax.

The Bottom Line:

Bitcoin continues to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some “altcoins” are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be revealed with time.