...failure to achieve critical mass ... leading to a downward spiral of liquidity and capitalization.
We've tested the lower bound of demand, shaken out the weak hands among the founding holders, and now emission decline is reducing supply. Failure to achieve critical mass is a reason to fail to go exponential. That's very different from a reason for demand to decline below December levels. And that is strictly required for a new low.
There also could be some partial instant collapses, such as the release of a coin based on zerocash or a Bitcoin ring signature sidechain.
Each of these events seems likely to bring more visibility to XMR, and hence more demand. Demand is really quite low because of a lack of uses. Since the cryptocoins-dice disaster, xmr.to and CryptoKingdom constitute the bulk of the non-speculative demand. Even bad news is good news for XMR at this point.
> 1. Bitcoin-style cryptocurrency not seen as useful (enough) by the market. Leads to same sort of downward liquidity spiral as above, but for the entire cryptocoin universe (except maybe other platform concepts such as Ripple, fiatcoin, etc.).
Negligible probability event.
> 2. Private cryptocurrency is not seen as useful by the market. Ditto.
Negligible probability event.
> 3. Bitcoin is perceived private enough or becomes more private (incl. sidechain)
Incredibly low probability event.
> 4. Zerocoin is perceived as trusted enough (both in terms of setup and cryptographic maturity)
Possible. Not sufficient. It must also be usable. Adequate trust is potentially achievable, but usability is a very low probability event.
> 5. Dark/dash is perceived as private enough (and/or is improved). Requires Dark/dash to also not collapse into a financial smoldering wreckage, or other non-privacy-related failure.
Now you're at the level of plausible conceivabililty, which is a high-water mark.
> 6. An unknown black swan technology replaces Bitcoin, and is perceived as private enough or has a private version.
That would be XMR, actually. Very nice outcome.
> 7. An unknown black swan technology replaces Monero's ring sigs, etc., and is perceived as private enough or has a private version. Monroe does not adopt/adapt, or fails to do so quickly enough.
Of your enumerated risks, this seems the most likely, and would require a failure of the community to adapt technically, forever. The displacing competitor would have some more usable variation of zerocoin's privacy properties, in all likelihood.
In aggregate I don't think these suffice to make failure to thrive more likely than thriving. Most of them are of pretty negligible likelihood, or depend on some dramatic technical innovation, which is certain to occur, but only after an unknowable delay, which is time for XMR to consolidate its niche.
But overall, I'm fairly convinced that failure to "take off" at some point will lead to the liquidity implosion into irrelevance (maybe not literally zero for very long time, but eventually that).
I agree on that point, as a limit in the infinite bound. But I have seen quite a lot of instances of a specific pattern which I think is dominating XMR valuation dynamics presently, and I consider it more likely than not that it will continue in this pattern:
When a company IPOs, there is a tendency for initial volatility to create a starting spike, after which a long, slow decline occurs, ending in a very wide bottom. You can imagine the investor dynamics, as hot speculation becomes a quarterly grind. When the business model and process matures to the point where organic growth is manifest, price rises, slowly at first, then in a sequence of manic rushes, as various tiers of investors pile in. Such issues are often called 'virgins', perhaps because they have yet to experience their first ecstasies.
This is very much where I see XMR today.
What it needs to flourish is basically just a lot of sweat, to consolidate value-enhancing business processes and models. In my view the overwhelming bulk of the early risk lies in the possibility that this sweat will not get invested in a timely manner. The risk profile changes after dramatic success and value-expansion has been achieved.
