Cryptocurrencies have come a long way since the first Bitcoins were used to purchase a couple of pizzas. A few holders (HODLers) who kept their faith got rewarded manyfold. Now they own Lambos, palatial homes, and businesses worth millions and some, billions in market capitalization.
If the end of 2017 taught us anything, it’s that the demand for cryptocurrencies is skyrocketing and every accountant, mechanic, forex mogul and the average John Does and Janes are all looking to get a bite of this cake. The massive following these digital assets have attracted has led to Wall Street diehards describing them as a bubble.
In December 2017, Bitcoin broke the charts by trading at a whopping $20k becoming more precious than exchange-traded funds (ETFs) and instruments. Forex markets were shaken as many day traders shifted their attention towards these fledgling but profitable currencies. Bitcoin wasn’t the only one minting profits; most other crypto projects set their new records as well. The market cap of all cryptos was nearing one trillion.
Repercussions of the gold rush
The rise of cryptocurrency was both its bane and boon. On the bright side, these assets got wide recognition as revolutionary financial instruments with the ability to expedite money mobility. There are no government authorities involved, and this means faster processing times than centrally placed systems.
The assets also introduced the world to the best digital ledger ever created-blockchain. As of this writing, mega-scale businesses are experimenting with this ledger to see how they can leverage its immutability and transparency.
On the downside, the cryptocurrency craze brought with it the rise of scam ICOs that have cost many people millions and billions of shillings. This led to many organizations and countries such as China banning all ICO activities within their jurisdictions.
In a bid to protect the reputation of their platforms as well as shield their users from shady ICO schemes, Twitter, Facebook, Google, MailChimp and several other social sites decided to ban all cryptocurrency-related ads. This action led to a slump in crypto prices for a few days before the markets stabilized again.
Looming government regulations and bans
Unable to tame cryptocurrencies, China has severally banned cryptocurrencies and ICOs and had all accounts linked to exchanges frozen temporarily. As a market that was once the heart of the crypto, China is currently handled with a grain of salt.
UK, India, Russia, and US’ SEC have intentions of regulating crypto assets. While such a move compromises the true essence of cryptocurrencies (decentralization), some people agree the move could classify them as legitimate assets and lead to more money flowing into them. At the moment, the goal of the Securities and Exchange Commission is to ensure there is no foul play by traders and exchanges and that shady crypto coins are eliminated.
Here is what lies ahead for these assets
Governments will have a role to play
No one will ever know you own cryptocurrencies unless an exchange hands over its records to regulators. Government expects taxes to be paid on assets and they don’t like it when blockchain obscures its users. With time, they are going to find ways to know who owns digital assets and what dues are owed. What is hard to tell is if they can manage to fully regulate this asset class.
Crypto will revolutionize commerce
Cryptocurrencies are seriously disrupting the banking industry. The likes of JP Morgan’s boss Jamie Dimon and Warren Buffet have expressed their dislike for them and even warned that they are not legitimate investments, but crypto followers and evangelists think they are misinformed. Many people including IMF managing director Christin Lagarde think otherwise. They believe crypto assets have a significant role to play in the finance sector.
For instance, the P2P transaction style of these digital currencies roots out intermediaries, banks, and advisors who have a habit of requesting stiff fees. Therefore, cryptos are seen as a way to save some bucks.
Cryptocurrencies will still be volatile
After peaking in December, all crypto assets including Bitcoin began to slump in prices. The retracement period saw more than $500 billion wiped off from the market cap of all cryptocurrencies. Even after detractors continued to spell doom over them, claiming that the bubble was about to burst, nothing of the sort happened. In fact, the prices started to go up once again. At the moment, the market cap of all cryptocurrencies is oscillating between $300 and $500 billion.
The volatility factor is what’s making these assets profitable at the moment. It’s pretty hard to make Bitcoin price predictions but here’s a piece of advice if you’re looking to day trade- just like forex commodities, you need the prices to swing in order for the day trader to earn some shekels. However, extreme volatility might be resolved with time to allow these currencies to be used in buying day to day commodities.
Cryptocurrencies will displace fiat currencies
Futurists Thomas Frey and Dr. James Canton believe that crypto projects are here to stay and they will replace fiat currencies by 2030. According to Frey, these digital coins have been accepted by many people and companies as legit payment methods alongside traditional money. But since they offer cheap cross-border payments, anonymity, and low fees, they have a shot at displacing national currencies.
Increased acceptance by merchants
At the moment, a smaller percentage of merchants accept cryptocurrencies. However, each year, the number keeps growing, and in the near future, virtually every shop-offline or online will begin accepting Bitcoin and other crypto assets as a form of payment.
The rise of cryptocurrencies with divergent criteria
Current cryptocurrencies are battling with a myriad of issues like lack of adequate consumer protection, slower transaction times, and complex themes for an average individual to understand. Very soon, most crypto projects are going to be anonymous without being a medium for nefarious schemes, mathematically complex yet easy for common people to use, and possibly regulated.
Last but not the least, blockchain ventures are on the rise. As their number skyrockets, the effect will likely rub on cryptocurrencies resulting in widespread adoption. Cryptocurrencies are highly volatile, and they may or may not be a bubble, but one thing is certain, there are better days ahead for these assets.