What You Need To Know About Cryptocurrencies
The future of cryptocurrencies is widely discussed by digital currency investors and enthusiasts. The past decade has seen exponential growth in cryptocurrencies, especially since the launching of Bitcoin in 2008.
Mobile wallets are gaining in popularity as they offer users quick access to their cryptocurrency funds without compromising on safety. As more people begin investing and trading cryptocurrencies, the crypto market will continue to expand and further shape the world’s economy and financial landscape.
This makes it essential for crypto investors and traders to stay informed about upcoming trends, regulations, opportunities, and developments so they can make informed decisions when engaging with cryptocurrencies.
With new technologies emerging every day focused on making cryptocurrencies easier to use, invest and trade, the future certainly looks bright for cryptocurrencies in 2022 and beyond.
What is Cryptocurrency?
Before we discuss the future of Cryptocurrency, it’s information to first understand what it is.
Cryptocurrency is a type of digital or virtual currency that uses cryptography for security on a decentralized blockchain technology and is independent of a central bank.
It operates through a peer-to-peer network. Hence, its value is distributed among the people in the network and is independent of the value of the US dollar.
What Happened To Crypto In 2022?
The digital currency market was hit hard in 2022 when leading digital assets Bitcoin and Ethereum suffered sharp dives of more than 50% from their all-time highs.
But the volatility of digital currencies didn’t stop there – smaller digital asset classes saw large drops in value over a short period of time. This included the digital currency Terra Luna, which experienced huge losses within days.
crypto world also saw setbacks in 2021, with FTX filing for bankruptcy after traders pulled away billions from the platform and Binance bypassing a rescue bid.
Financial experts have deemed this occurrence a bitcoin crash, making predictions that cryptocurrencies may be entering their end times as calls for digital asset regulation become louder.
What Is The Future Of Cryptocurrencies?
In this section, join us as we predict the best and worst possible scenarios for the future of the cryptocurrency market in the years to come.
1. Regulation Policies In Place
Perhaps the most sensible consequence of the bitcoins crash of 2022 is cryptocurrency regulation, most particularly in the US. According to Time, U.S officials have shown interest in stablecoin regulation following the Terra Luna crash. In May, crypto markets went into a freefall that led the stablecoins depeg from the dollar and, in turn, caused its linked cryptocurrency Luna to crash. This resulted in the vanishing of Terra and Luna investments in a matter of days.
Furthermore, US President Joe Biden also signed an executive order on cryptocurrency, directing federal agencies to implement a strategy for policies and regulations on digital assets like crypto.
Biden’s order calls on agencies to make sure that the country’s cryptocurrency laws align with those of U.S. allies, and tasks the Financial Stability Oversight Council (FSOC) to investigate any illicit financial concerns. This order sheds light on the possibility of a new government-issued central bank digital currency (CBDC).
Hence, it lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
- Consumer And Investor Protection
- Financial Stability
- Illicit Finance
- U.s. Leadership In The Global Financial System & Economic Competitiveness
- Financial Inclusion
- Responsible Innovation.
With these, it could only mean that cryptocurrencies are here to stay, and will have better stability on prices, with a regulation system in place.
2. Wider Adaptation Of Cryptocurrencies
With the executive order released by the White House, it means that the cryptocurrencies’ impact on the economy is being recognized by the US federal government, which holds the currency of the world, the dollar.
In the past years, many mainstream businesses like Paypal have adopted cryptocurrencies in their payment systems.
In the future, it is predicted that more businesses will accept digital currencies as a form of payment, increasing their value and security from fraud, all while reducing volatility and criminal activity.
3. Crypto Everywhere?
Digital assets may not just be limited to coins as more blockchain-based assets became popular in 2021.
NFTs, or non-fungible tokens represent digital ownership of a wide range of irreplicable intangible items and have drawn the attention of celebrities and big companies.
The sale of Beeple’s digital artwork set the record for the most expensive sale of an NFT ever, selling at $69 million. And this is only the start.
One possible future scenario is that more companies will turn to blockchain-enabled records, trading and investments as a way to securely store data and transact.
NFTs could become popular for digital collecting, ranging from art to music, and even sports cards. We may even witness the emergence of “smart contracts” that allow parties to enter into agreements and transfer funds without a third-party intermediary.
The real world applications of blockchain technology are far reaching, making cryptocurrencies a part of our daily lives, almost invisibly.
The End Of An Era?
While many crypto enthusiasts believe that the US government has legitimized cryptocurrency in its executive order, many financial experts believe otherwise.
In fact, according to the U.S. Library of Congress, as of November 2021, a total of nine countries have banned cryptocurrency completely. These countries are Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia.
With the US Federal Reserve’s tightening monetary policy and rising interest rates, together with surging inflation, consumer purchasing power was greatly reduced in 2022. Hence, many investors want to reduce their exposure to risk-on assets such as cryptocurrency and utilize their cash instead on less-volatile markets. Thus, many believe that this will further sink the Bitcoin market.
To many, this was the end of an era for cryptocurrencies. As fiat currencies evolved and strengthened during this period, the price of digital assets like Bitcoin depreciated in value.
Many government officials who were once supportive of cryptocurrencies had to turn their backs on them, as they became viewed more as a speculative asset than a store of value.
Furthermore, according to Forbes, consumer bank Standard Chartered has predicted Bitcoin prices will fall to as low as $5,000. The bank’s global head of research, Eric Robertsen, wrote:
“More and more crypto firms and exchanges find themselves with insufficient liquidity, leading to further bankruptcies and a collapse in investor confidence in digital assets.”
Eric Robertsen
Traditional banking systems and the stock market have existed for years, but the rapid growth of cryptocurrency has created an entirely new asset class for investors.
Crypto transactions are heavily monitored by different actors in the industry, such as exchanges and custodians. However, as a result of a lack of regulation, these technologies remain vulnerable to hackers and other malicious activities. In early 2022, there were various security breaches reported in the crypto industry due to this risk.
These factors, many believe, will affect the pricing of cryptocurrency, and will lead to more insufficient liquidity and bankruptcies, just like what happened with FTX.
Conclusion
With the various factors affecting cryptocurrency, it is hard to tell what the future holds for this digital currency. In this article, we have discussed some of the best and worst-case scenarios that are likely to happen in the future.
Whether you are thinking of investing or want to build your savings, the cryptocurrency market remains to be a volatile choice, with much higher risks than traditional investments. And because of its decentralized nature, no one can truly tell when it will hit its peak, or otherwise.