The Future of Cryptocurrency and Why You Should Enter Now

 The Future of Cryptocurrency and Why You Should Enter Now

2022-03-28

Key Takeaways:

The boom that cryptocurrency witnessed last year made headlines, spurring discussions about what it is and how it can be leveraged globally

Cryptocurrency can indeed be used for transactions like money but unlike fiat, the RBI holds no control over its supply or value

Officials all over the world have already started pondering how to incorporate crypto into the mainstream

Despite short run volatility, cryptocurrency holds future promise

What exactly is crypto?

Cryptocurrency became the hottest topic last year, intriguing everyone from high worth individuals to institutional clients to the working professionals living next door. Bitcoin alone surged in value by 1,95,000% since its market debut 10 years ago. Today, the total crypto market has ballooned to $2.05 trillion, equivalent to the 8th largest economy in the world.

Nobody is unaware of the crypto boom we witnessed last year, with individuals making millions off BTC alone, the mysterious rise of meme coins and the equally drastic free fall crypto seems to be in today. Next-gen globalists continue to argue crypto that crypto is the new tomorrow and this ‘buy the dip’ is nothing short of a digital golden opportunity. Has the cryptocurrency craze seen the end of its time then, or is now another chance to jump on the bandwagon?

Is cryptocurrency money?

To come up with an answer to that question, one ought to understand what function cryptocurrencies serve. Are these money? Are they like shares traded in the stock market? Where does crypto lie in the spectrum? Since time immemorial, the definition of money has never remained constant. Crypto does achieve money’s fundamental functions, partly, as it can be (i) a unit of account traded in fractions e.g., 0.0001 BTC, (ii) universally traded as a mode of payment without any transaction fee, (iii) standard of payment issued on a decentralized trustworthy network and (iv) a source of speculation and hoarded as an asset holding value. In addition, features like costless transactions and no inflation tax make crypto worthwhile. In layman’s terms, cryptocurrency can indeed be used for transactions like money but unlike fiat, the RBI holds no control over its supply or value. Its complex algorithm-based structure makes it next to impossible for any Central Bank to own the ecosystem, making every major institution from the Fed to the RBI uneasy about cryptocurrency’s growing popularity. 

The idea that crypto can soon become money should be taken with a pinch of salt. The strength of the underlying value of any cryptocurrency is too volatile to be accepted as money in Emerging Markets, especially India which is the world’s 2nd largest. Perhaps, if it is accepted by authorities, this volatility might in fact stable down. As a real-life example, El Salvador became the first country to make Bitcoin legal tender in September 2021, citing financial inclusion and transactional efficiency. For a country like El Salvador where over 50% have no access to the internet, the decision seemed ill suited as penetration remained low while S&P and Moody’s downgraded the highly indebted country’s ratings to Caa1. Until the global economy grows accustomed to crypto and its uses, it is a long shot that crypto becomes universally accepted as money.

Could crypto then have a future as a financial asset instead then? Indeed, crypto started out as a viable investment alternative due to its limited access. Over the last 2 years, it has gained tremendous value and is increasingly being hoarded as an asset. Ever since late 2021, it has also been mimicking the equity market hinting at future tendencies of becoming a similar financial asset.

Why the world should care about cryptocurrency

There is ample evidence that crypto, and blockchain- the network that hosts it, are well here to stay for the long term. Benefits of blockchain are wide ranging from law to individual property to international aid in geopolitical crises (More than $10mn in Bitcoin has been raised towards Ukraine till date. Read more here. Crypto too enjoys easy movement across borders, transparent transaction systems without any middleman to trust. Officials all over the world have already started pondering how to incorporate crypto into the mainstream and corporations have long started accepting crypto as a source of payment as well as investment. The advent of ‘stable coins’ helps too, versions of cryptocurrency backed by existing FIAT like the dollar to reduce excessive fluctuations in value. Sure, cryptocurrency by virtue of supply and demand will also have some element of volatility but these are exacerbated in the short run simply because Central Banks are in the process of figuring out how to internalise them without losing its existing relevance. Future developments may focus on making these safer as investments and less attractive for any criminal activity, strengthening crypto’s use cases even further. 

Notwithstanding recent short-term disturbances, there is no reason for economies to restrict adoption of crypto. Rather, accepting cryptocurrency allows scope for effective regulation. The RBI has already expressed interest in blockchain technology and is even under way in introducing its own Digital Rupee, much like the Digital Yuan. Further, recent announcements like those of the Fed chair & Indian government make it unlikely that crypto will be banned anytime soon in these economies, indicating the development of a soft corner for this technology. Instead, Central Banks could integrate crypto in novel ways like providing certificates of crypto issuance instead of trying to control its actual minting, where individuals could reach out to authorities directly. 

Cryptocurrency seems to pose an intriguing ‘regulator’s dilemma – striking a balance between technological progress towards financial innovation while still maintaining sovereign authority. While its never-seen-before boom looked promising, the crypto slump today sparks concerns. But one thing remains quite sure, despite short run volatility, cryptocurrency holds future promise. With technological advancements, crypto and blockchain will become integral parts of the financial ecosystem, in one way or another. How economies will incorporate all that crypto has to offer remains to be seen, but even today most enthusiasts and owners believe there’s a lot more to make from returns in cryptocurrency. The charts attached show that most investors are far less nervous about Bitcoin’s price drop today than they were last year, probably because of increased acceptance, policy inclusion and technological development.

Then how does one take part in this trend today? Binance is the world’s largest cryptocurrency exchange by volume and offers a one-stop solution for this exciting crypto universe. 

Read more at Binance:

How to trade crypto and learn easily