Bitcoin (BTC) is currently trading at little more than half its value from its peak of nearly $20,000 in mid-December, with some market soothsayers predicting it could fall again.
But despite its volatility and reverberating effect on other cryptocurrencies such as ethereum (ETH), litecoin (LTC) and monero (XMR), the economy, IT security, and even the markets are unlikely to notice much affect from this pricing drama.
“I don’t think [bitcoin’s plunge] will have a meaningful impact on the economy: way too small relative to the economy,” Jeffrey Miron, a senior lecturer and director of undergraduate studies in the economics department at Harvard University, told ThirtyK.
Indeed. The aggregate market capitalization of cryptocurrencies is a mere 3.2% of U.S. GDP and 0.8% of world GDP, according to a Goldman Sachs January 2018 Investment Strategy Group Outlook report. Compare that to the combined market cap of the Nasdaq and S&P 500 information technology stocks, which accounted for 101% of U.S. GDP and 31% of world GDP at the height of the dot-com boom in March 2000, the report notes.
“If bitcoin falls to $1,000-plus, it would just be back to where it was one year ago. The technology will survive, the concept will survive.”
Regardless of whether bitcoin and other cryptocurrencies continue to see their value head south, that will have little impact on their core purpose — allowing transactions to occur more securely and efficiently, say economists, market watchers and security experts.
If the value of bitcoins falls, cybercriminals will just charge victims more bitcoins to unlock their computer infected with ransomware, Nick Furneaux, managing director of computer and security forensics company CSITech, told ThirtyK.
In a 2014 Stanford blog post about, Susan Athey, an economics professor at Stanford Graduate School of Business said:
“The level of the bitcoin exchange rate is not important for bitcoin to be useful as a medium of transaction. Suppose that an individual wishes to use bitcoin to transfer value. She can buy bitcoins and sell them, and the recipient can cash them out, and for this purpose it does not matter whether the exchange rate is $1,000 per bitcoin or $100 per bitcoin.”
Stocks, Security, Survival of Bitcoin and Cryptocurrencies
Although the stock market underwent a correction this month with the S&P 500 plummeting 10% in nine days on fears the central banks will raise interest rates, it had no correlation with bitcoin’s so-called correction.
Bitcoin and other cryptocurrencies have suffered as China, South Korea, the U.S., and other countries consider regulatory measures to reign in the virtual currency industry. China, for example, is eying a ban on initial coin offerings (ICOs), as well as cryptocurrency exchanges that allow the buying and selling of virtual currency, China Daily reports. And South Korea, according to a CNBC report, passed a new law allowing only people who hold a real bank account to trade in cryptocurrencies. South Korea’s move is designed to cut down on cryptocurrency crimes, the report noted.
Such regulation may ultimately serve to help legitimize cryptocurrency to a wider audience.
Meanwhile, the falling value of cryptocurrencies is expected to have a nominal impact on cybercriminals.
“Criminals follow the money and where possible, follow easy money,” Furneaux says. “Where increased value exists, the motivation is higher. Lower value, lower motivation.”
He added, however, that the “gates are open now and the attacks will continue. Organized crime will also have a view on the long game, stealing resources and then holding until the value increases again.”
Bitcoin and other cryptocurrencies could drop again. Peter Boockvar, chief investment officer for Bleakley Advisory Group, told ThirtyK that bitcoin may fall to as low as $1,000 in the future.
But, he added, “If bitcoin falls to $1,000-plus, it would just be back to where it was one year ago. The technology will survive, the concept will survive.”
Wall Street watchers, such as Steve Strongin who heads Goldman Sachs Global Investment Research, say some cryptocurrencies may ultimately zero out. In Goldman Sachs Top of Mind Report: Is Bitcoin a (Bursting) Bubble?, Strongin predicts cryptocurrencies of today will probably not be around in the next five to 10 years. However, he notes in the report, something better may build on that technology and replace it.