What Happened to Cryptocurrency?

In early 2018, in an email to a colleague, I wrote this about cryptocurrency, and it remains prescient even today:

Regardless of when this is being read, the cryptocurrency market will have wildly shifted within the last few days. As cryptocurrency remains prevalent in the news, merchants and all others in the payments ecosystem are striving to find out more information and determine what role, if any, they should take as it relates to accepting or transacting in cryptocurrency. Given the fact that the current value of any given cryptocurrency is tied to speculation and a volatile market, merchants should maintain a stance of cautious curiosity. Within merchant organizations, chances are no treasury department is going to give any credence to any monetary instrument that does not give access to a safe and predictable cash flow. Within the payments industry overall, acceptance and movement of cryptocurrencies remains highly unregulated but does offer some opportunity to generate revenue acting as a middleman, assuming the exposure and holding of the currency will be limited.  Overall, cryptocurrency will remain a newsmaker in 2018, but the industry needs to remain wary of their position and involvement.”

As time has passed, cryptocurrency has lost some of its buzz, but continues to exist on the periphery of retail and banking.  What happened to the surging cryptocurrency prices and why should all involved remain wary?

Speculation, Value, and Use

Bitcoin surged to an all-time high price of nearly $20,000[1] in December 2017, following years of prices ranging from $2 to $1,000.  As a speculative currency, economic leaders issued warnings and advisories[2] on participation in the purchase, holding and use of Bitcoin, while people continued to try to buy their share of a currency that appeared to be limitless in its potential.  Since that all-time high, Bitcoin plunged all the way down to $3,600 and has since settled in the $10,000 range.   Aside from Bitcoin, cryptocurrencies from all different avenues began to flood the market— Steven Seagal, known more for campy action films than financial prowess, served as the official ambassador for “Bitcoiin2Gen”[3] and Ghostface Killah of the Wu-Tang Clan abandoned the motto of CREAM[4] and released an eponymous cryptocurrency.  Needless to say, both of these endeavors, along with numerous bitcoin copycats, failed to survive or generate the value and buzz of the original.

Caveat Emptor

A number of merchants do “accept” bitcoin, with the prevailing and smartest method of acceptance being a transaction that settles and acts as dollars from the merchant perspective.  Any merchant who dares to accept, hold, and hedge their organizational financial position with Bitcoin has a far more audacious stance on treasury management than any shareholders would ever be willing to accept.  Overall, merchants should remain cautious of any cryptocurrency acceptance that relies on holding, trading and converting this currency back into more traditional currencies.

For further discussion, contact Tim Radway tradway@wcapra.com


[1] https://coinmarketcap.com/currencies/bitcoin/historical-data/?start=20130428&end=20190912

[2] https://www.ftc.gov/news-events/blogs/business-blog/2018/02/know-risks-investing-cryptocurrencies

[3] https://www.cnet.com/news/steven-seagal-cryptocurrency-bitcoin/

[4] https://www.cnbc.com/2017/10/04/wu-tang-clans-ghostface-killah-is-backing-a-cryptocurrency-venture.html