The idea of cryptocurrencies (digital currencies that are cryptographically encrypted) has been moving around in the academic circles since the 1970s. The idea, however, took on form and shape with the arrival of Bitcoin in 2009. Over the last 9 years, Bitcoin has grown on to be disruptive in the fields of monetary policy, finance, economics, and e-commerce – and it has spawned an industry of more than 2,000 coins, tokens, and altcoins in what is being generally referred to as the cryptocurrency market.
Future of Cryptocurrency
Interestingly, the cryptocurrency market peaked last year when the price of Bitcoin rallied more than 1400% to $19,000 and the market cap of the cryptocurrency market skyrocketed to almost $700B. However, in the year-to-date period, the trading price of Bitcoin has crashed about 53% to about $6,500 and the market cap of the crypto market has declined more than 56% to $209B.
Now, no one knows for sure how cryptocurrencies will fare going forward. There’s an ongoing debate on whether cryptocurrencies will become the future of money or whether the idea will eventually fade into oblivion if it is unable to build up a critical mass. This piece provides insights into how the fate of cryptocurrencies might pan out going forward.
Bitcoin is still the king of crypto
Bitcoin is still the biggest and most popular cryptocurrency in the market; in fact, the first interaction that most people have with cryptocurrency and blockchain technology can be traced to Bitcoin. Bitcoin currently has a dominance of about 53% of the cryptocurrency market; hence, its price often determines how other coins and the general cryptocurrency market will fare. Going forward, the realities of the market suggests that the dominance of Bitcoin might not increase but it will most likely remain unchallenged. Of course, some coins are correlated to Bitcoin and some other coins have inverse relationship with Bitcoin; nonetheless, smart cryptocurrency traders and investors will do well to pay attention to Bitcoin in formulating strategies about how they want to play other coins.
Massive changes are coming to cryptocurrency exchanges
Cryptocurrencies exchanges serve the dual function of facilitating the exchange, buying, selling, and trading of cryptocurrencies – they are a large cog in the wheel of the cryptocurrency industry. Ironically, most of the cryptocurrency exchanges in the market are centralized in nature—in sharp contrast to the decentralized nature of cryptocurrencies and blockchain technology. The centralized nature of these exchanges has made them prone to data breaches, hacks, and outright heists. Going forward, there will be growing demand for DEX Exchanges, which are decentralized in nature and maintain a public ledger of transactions through consensus.
The volatility of the markets won’t die anytime soon
Cryptocurrencies are inherently volatile, and their volatility is one of the reasons fortunes are made (and lost) in the market. One of the main reasons behind the volatility in cryptocurrencies are that they are still in the early adoption phase and there’s a huge upside potential if they could break out into the mass market. However, every bit of news about cryptocurrencies will either hint at the possibility of stunted growth (and the prices fall) or hint at the possibility of reaching the mass market (and prices rise). The volatility in the crypto markets will continue to be felt since news moves the market and the volatility won’t likely stop until there’s mass-market momentum.
Institutional investors will bring more funds and insist on sanity in the market
In the early day s of cryptocurrency, traditional financial institution and government financial agencies were quick to denounce, criticize, and vilify cryptocurrency enthusiasts. The crypto market has however proven to be incredibly adept and resilient in the face of these attacks. Now, the perception of traditional financial institutions about cryptocurrency is changing. Going forward, stakeholders can expect to see an increasing inflow of funds from Wall Street into the crypto market as crypto funds, ETFs, and other investment vehicles debut. However, the inflow of Wall Street will also require increased transparency, accountability, and regulations.