Posted November 15, 2018 03:17:16The cryptocurrency market has seen unprecedented growth, but a growing number of analysts believe the market is not sustainable.
The value of a single cryptocurrency has shot up from about $1.5bn in 2016 to $2.3bn today.
The market for the virtual currencies bitcoin, ether, litecoin, dash and ethereum has exploded since the beginning of the year, with some estimating it could top $10bn by the end of the decade.
According to analysts at Capital Research Group, the current market value of the cryptocurrencies could top more than $2tn by 2021.
Bitcoin, the most popular of the altcoins, surged from $400 per coin in March to more than 5,400 by June.
In October, the value of bitcoin rose from about a tenth of a cent to $1,200.
Ether, a different altcoin with a similar formula, climbed from $500 per coin to $3,200 in December.
Dash, the third-most popular cryptocurrency, was up nearly $100 per coin last year.
Ethereum, the second-most-popular cryptocurrency, surged more than 70 per cent in a year.
Dash’s value is now nearly 20 times greater than the value that investors have been putting into the stock market.
Many analysts expect a more moderate rise in the next two years as the number of altcoins matures.
This could result in a return to the levels seen in 2016.
But with the market still growing at a rate of almost 20 per cent a year, analysts say the cryptocurrency market is unlikely to remain profitable for the foreseeable future.
“I don’t think there’s a viable market for it,” said Jonathan Cohen, an analyst at Wedbush Securities.
“It will probably get a bit more of a run,” said Marc Faber, chief executive of Blockchain Capital.
“The only thing that keeps us going is the price of ether and the number and volume of tokens that are created,” he said.
Mr Cohen believes cryptocurrencies are “overvalued” due to their use in a number of “dark web” transactions.
“You have a lot of dark web activity where there’s no government regulation, so there’s very little oversight,” he told CNBC.
“They are very easy to get money out of.”
Cryptocurrencies such as bitcoin, ethereum and dash are not backed by any government, and there is no central bank to monitor their value.
They can also be traded for cash or used to fund terrorist attacks.
The US government recently said it would ban cryptocurrencies, a move that will likely lead to a drop in the value.
“There are very few things that I have to worry about that are more problematic than a ban on cryptocurrencies,” said David Hirsch, chief investment officer at J.P. Morgan.
“We’re probably at a tipping point with this,” he added.
Cryptocurrency trading is also becoming increasingly difficult for authorities.
“People are becoming more savvy about the dangers of using the cryptocurrency markets and trying to manipulate it, and people are not as good at keeping their eyes open,” said Brian Kelly, an investor at Wells Fargo Investment Research.
The digital currencies are also being used by criminals and fraudsters to buy drugs and other illegal goods.