Editorial Team

Editorial Team

Cryptocurrency - A story of excesses, opportunities, & innvovations

Over the past several years, cryptocurrency has become a ubiquitous part of our lives. From a fringe internet experiment about the future of money, to now becoming it’s own diversified portfolio across blockchains, the idea — and ultimately the utility — of cryptocurrency is here to stay.

2022 opened with plenty of promise for the future of digital tokens. During the Super Bowl, companies advertised their centralized exchanges with everything from technology throwbacks to celebrity spokespersons including Matt Damon and LeBron James. Their message was clear: Cryptocurrency is the future, and fortune favors the bold.

As the year continued on, investors experienced a significant downturn spurred onward by a number of global challenges, including war in Europe, a surge in oil prices, and residual problems in the supply chain from the COVID-19 pandemic. In turn, all investments — including digital assets — began to fall from record highs.

In today’s economic environment, cryptocurrency is getting tested like never before. Although cryptocurrency is here to stay, now is a good time to sort out a strategy and prepare for the real future of digital currency.

Understanding Cryptocurrency Through the Gartner Hype Cycle

The Gartner Hype Cycle was created by research and advisory firm Gartner to visually explain how digital technologies mature over time. The model is similar to the Dunning-Kruger effect, except instead of measuring one’s self-confidence in their abilities, it is applied to the growth and adoption of technology.

The Hype Cycle describes the five stages of development for every successful technology. They range from the euphoria of early adoption, to the troubles of disillusionment, and ultimately success through mainstream use and utility.

The five steps of the Gartner Hype Cycle are:

  • Innovation trigger: Every new idea starts with an innovation trigger: The point where a proof-of-concept goes live and media spreads it like a wildfire. Although there may not be utility yet, the potential attracts early adopters and evangelists to the idea.
  • Peak of inflated expectations: Early success stories drive the peak of inflated expectations forward. While some will fail and others will experience less-than-optimal results, the best stories will drive both individuals and companies into action.
  • Trough of disillusionment: With more users and companies invested in the technology, every new opportunity faces the challenges of consolidation, running out of funding, and negative headlines. This begins the “trough of disillusionment,” where the tech faces its first true challenge for survival.
  • Slope of Enlightenment: Its been said that “necessity is the mother of invention.” In this situation, invention is less about solving existing problems, but rather the new ones created by the trough. Through this phase, the technology will find new utility and ultimately launch new products innovating towards the future.
  • Plateau of Productivity: With new uses and more potential than ever before, the plateau is where late adopters see the value of the technology, and begin to embrace it. Although it may take longer to reach the early peak again, the plateau will ultimately grow over time to create a stronger and more diverse opportunities.

Much like the technological advents which preceded the development of cryptocurrency — advances in personal and industrial computing, the rise of the Internet, and social media — digital currency is now naturally moving through the hype cycle. As history shows, the challenges every new idea contends with only makes it stronger, leading to greater results over time.

The State of Cryptocurrency Along the Hype Cycle

Like all major technological advances, cryptocurrency has naturally followed the patterns outlined by the Gartner Hype Cycle. While one could argue that the Satoshi whitepaper provided the innovation trigger, others could say that the rise of Ethereum and other separate blockchains provided the spark.

From there, we’ve seen the peak of inflated expectations across the entire environment. In late 2021, Bitcoin hit a peak value of $68,991, while popular non-fungible token projects like Bored Ape Yacht Club set new records for digital art sales figures. At the same time, numerous centralized exchanges launched online, each one claiming to offer the most benefits and protections for users.

However, cryptocurrencies are not immune to the greater economic downturn in front of the world. As a result, the entire environment is sliding into the trough of disillusionment. Since hitting the the record highs, Bitcoin has lost two-thirds of its value, while centralized exchanges are being forced to reconsider their future. In the past months, Voyager sought bankruptcy protection due to being overexposed in loans, while FTX agreed to an option to purchase competitor BlockFi.

If the Gartner Hype Cycle provides a glimpse into how technology evolves over time, than we can project that the “crypto winter” will eventually come to an end.

Where Should Crypto Investors Stand Today?

For those who still believe in the potential for cryptocurrency, now is the time to start looking towards the future. Digital currencies are still very young and utility for tokens is still developing. Although it is likely that blockchains will remain a consistent part of life, it will take lots of ups and downs before we get there.

Smart investors will use this opportunity to start sorting the “memes” from the projects with potential value. For example: There was a time where both Bitcoin and Ethereum were not considered “blue chip” cryptocurrencies. After wide adoption and the creation of use cases, they are now considered among the top digital assets. The current trough gives investors the opportunity to research new blockchains and understand the future direction of different tokens.

Investors who still want to put money into cryptocurrency should go in understanding that their money may not grow for some time. Now is the time to understand what you are buying, and only get into projects you are comfortable risking money into.

Even though the market is in a difficult spot, now is the time to start preparing for the next few years of market returns. Unifimoney’s Investments-as-a-service platform can help bank customers expand into cryptocurrency in a thoughtful manner. Set up a call with our team today to see how we can help your partners grow their wealth with an all-in-one solution.

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