Digital currency market capitalisation surpassed seven hundred billion dollars this week. Traders rushed toward Bitcoin, Ethereum, Ripple and lesser-known tokens to capture sudden price surges. Senior figures at Goldman Sachs, JPMorgan but also Deutsche Bank dismissed the entire asset class as a speculative mania.
ShapeShift chief executive Erik Voorhees, a vocal cryptocurrency advocate since 2012, told reporters that the sector exhibits textbook bubble symptoms. He added a nuance absent from most commentary – two separate inflations now unfold side by side.
Voorhees explained that Bitcoin retains the largest user base, transaction count and market value in its nine year history. Alongside it, hundreds of alternative tokens launched, each claiming faster settlement, lower fees or novel governance. Launched in 2015, provides smart contract capability – its native token, ether, rose more than nine thousand percent during 2017. Bitcoin advanced roughly nineteen hundred percent in the same period.
The divergence in price appreciation versus network adoption signals froth – according to Voorhees. Ether’s meteoric climb outpaced growth in decentralised application deployment. Bitcoin’s price surge exceeded growth in merchant acceptance and on-chain transaction volume.
Voorhees argued that cryptocurrencies compete less with one another than with legacy payment rails, central bank money and restricted capital markets. Expansion of any token enlarges the total addressable market for all tokens. Mutual exclusivity therefore misrepresents the competitive dynamic.
Retail holders treat most tokens as lottery tickets; they purchase on rumour, hold for days or weeks – liquidate on price spikes. Utility as a medium of exchange or as fuel for smart contracts remains secondary.
Voorhees identified bubble behaviour in alt coins after Ethereum’s April 2017 breakout and in Bitcoin after the September launch of regulated futures contracts. Both sectors trade far above replacement cost – he declined to forecast peak prices or the magnitude of the eventual correction.
âBitcoin will print a lower price in 2018 than the current quote,â Voorhees predicted. âI endured four prior draw downs exceeding eighty percent. Further cycles lie ahead. If open blockchains displace portions of the financial stack, the rational tactic remains accumulation followed by multi year custody. Traders who expect immediate profit face probable loss.â
Two concurrent bubbles imply staggered ruptures. Historical data show that Bitcoin and alt-coins decouple for weeks or months. The 2013 Bitcoin spike peaked in November – the majority of alt coin rallies crested during January 2014. Analysts misjudged both events as a single phenomenon.
Investors who conflate the cycles risk mistiming exits and entries. Separate monitoring of hash rate growth, transaction count, developer commits and regulatory news for each token category reduces that hazard.