Blockchain crypto currencies had a large run up that peaked around December 1, 2017. Much has been said about the market capitalization of crypto currencies, which reached nearly a trillion dollars, and it’s decline.
Market Cap is meaningless
Maybe not entirely, but much like the money supply numbers published by the treasury it is a secondary number. Wall Street likes to multiply the shares outstanding times the share price to reach a market cap number. These types of calculations were used to present a value for Enron and Lehman Brothers.
Velocity of Bitcoin
First if we look at the number of transactions per day for Bitcoin, it was less than 50,000 in late 2012 but averages over 300,000 today. The number of transactions per day also peaked in December 2017 around 500,000.
Velocity of all altcoins
With the advent of many crypto currencies, additional growth in transactions per day is somewhat evident. But since many alt coin entries into the market came through a capitalization route that included the exchange of dollars for Bitcoins, followed by the exchange of Bitcoins to procure new alt coin media. So while additional coins add some to the transactions per day for all coins, some of the transactions per day in a market with more alt coins would include exchange transactions and not barter.
The initial growth of Bitcoin
Bitcoin had many avenues for barter, but a large one was the now shut down Silk Road. While the existence of a tender scheme unfettered from political control makes politicians of both parties nervous, Silk Road, it is alleged, went beyond any grey area of barter into areas where one party might be hired to hurt another party. The Fed’s did prove, we think, that the founder engaged in pay for arm twisting or worse. Another harmful area was credit card theft, cloning and dumping, a seriously bad business no honest person would pursue.
How to pay for dumps
While we think of Bitcoin as rainbows and unicorns, it is simply a fact that scammers used Bitcoin to pay for massive dumps of credit cards. Sadly, cash was used too. Just because a medium for tender can be used for bad transactions should not be an argument used to undermine any sort of monetary system.
So the question remains, how much real (and legal) barter occurs in crypto currencies? How can we develop a velocity measurement for crypto? It is hard to find a value for credit card charges per day, it might range between several million to a hundred million (especially on a Christmas Shopping day) dollars per day.
According to a Forbes article before the peak, Bitcoin Now Processes $2 Billion Worth Of Transactions Per Day, A 10x Increase In 2017 – When this was written, the author expressed no interest in the reason for the transaction. What is important is that Bitcoin is used for actual trade, not for day trading or trading for other digital currencies. Interestingly, the author mentioned that Ethereum was seeing a lot of transactions per day.
In order to develop some crypto velocity, we will need to see an increase in real world barter, which perhaps is coming. We will probably see that in Ethereum, Litecoin or Bitcoin Cash, as these media are trying harder to be useful for tender.
So when will crypto cash velocity gain momentum? First we need to see if we can find any.