Cryptocurrency isn’t going away—it is time to understand it.
The prevalence of cryptocurrency (widely referred to as crypto) is spreading around the globe. Most people wonder about the future of cryptocurrency in a world of virtual exchange and complicated cross-border regulations. If you are a cautious person, you might only now be looking into crypto.
If you are adventurous, you have already jumped in, but you may find yourself curious about the future of cryptocurrency. Where is it headed? Nobody has a crystal ball, but there are indicators that this global phenomenon is here to stay.
The movement and growing acceptance warrant a second look at the unique concept of cryptocurrency and how it may impact the global economy as it gains traction.
More Mainstream Acceptance of Crypto
Anything new only gains traction if it is widely accepted, and crypto is no different. The value of any investment is primarily guided by public opinion. The steady increase of the leading cryptocurrencies is reason to believe that acceptance of this exchange form is spreading, fast.
Investors sometimes sit back to see if an important entity climbs onboard. As crypto is used and accepted by larger companies and investment banks, the current growth trajectory will continue. Soon, it won’t be a handful of mavericks playing with digital innovation so much as a normal money feature for the general public.
It is interesting to note that the COVID-19 pandemic has had a hand in the acceptance of digital currency in 2020. When banks closed lobbies, even people who typically didn’t bank online began to explore new platforms. As the world moved to online shopping and other transactions, acceptance of this as a ‘new normal’ ushered in the potential for individuals to embrace cryptocurrency.
However, there are some latent fears lurking for individuals and organizations:
- Lacking digital literacy
- With data privacy concerns
- Harboring distrust around digital currency
- Lacking access to smartphones or computers
- Battling to accept change
As more information is shared with the public, we will find that most of these concerns resolve naturally. The future of cryptocurrency is bright for general use and as an investment tool. More retailers will be taking the plunge to accept cryptocurrency for purchases, and the flood gates will open.
Large Investment Banks and Institutional Investors Building Assets in Crypto
Whenever an investment has the kind of return that cryptocurrencies have been experiencing, large investment banks and institutional investors notice. Cryptocurrency is outperforming many other investments, and this trend is set to continue.
As heavy-hitters accept and invest in the future of cryptocurrency, it inspires others to come to the table. There will always be nail-biting fluctuations in an investment, but crypto is no different from traditional investments in this regard.
The potential profitability seals the future of cryptocurrency. The next decision will be where to invest, including the option of banks offering their own digital currency.
Big Companies and Central Banks offering their own Digital Currency
Has the financial world built a better mousetrap? It is no surprise that big companies and central banks aren’t just investing in existing cryptocurrency but looking to offer their own version of it. Cash use is declining, so it makes sense that financial institutions would shift their attention to central bank digital currency (CBDC).
In 2017, roughly 65% of central banks were engaged in CBDC work. The number climbed to over 70% in 2018 and over 80% in 2019.
There are many reasons for these increases, such as:
- Facilitating cross-border payments hampered by COVID-19 restrictions
- Potential easing of regulations involving cryptocurrency
- Widening acceptance of cryptocurrency
- Reliable and risk-free access to central bank money
- Ability to transfer funds quickly in a crisis
It takes time for mainstream companies and central banks to develop a digital currency. The organizations recognize the need to proceed cautiously in new territory. Several aspects need attention, including institutional, system, and instrumental features, as well as design considerations.
Ease in Regulations Involving Crypto
The United States federal agencies are tasked with overseeing the financial system play a role in cryptocurrency regulations. It will be interesting to see how quickly these guardians can keep up with the dynamic innovative and technological advancements of digital currency.
Some critics see administrative transitions within the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) as pivotal to the discussion. The key is going to be for these federal agencies to strike a balance between fostering economic growth and protecting the national market.
The current U.S. administration understands the positive role of crypto. However, it is likely there will be strict regulations to hamper the funding of terrorism and money laundering as part of the future of cryptocurrency in the United States.
Time will tell whether further limitations will also be imposed.
Future of Bitcoin
Bitcoin will continue to have favor with investors because of its past and continued successes. Even after taking a hit during the pandemic, it bounced back easily and continues to make strides.
Many experts that keep a close watch on the future of cryptocurrency are favoring Bitcoin. Some call for it to increase to 15 times its current value, with more modest estimates at double the value by the end of 2021.
Despite these projections, it is wise to consider the players that could adversely affect the future of Bitcoin, including:
- The growing number of new cryptocurrencies
- Potential for Big Tech to join in, such as Facebook
- Increased regulations
- The overall volatility of cryptocurrency as a platform
Future of Ethereum
Interestingly, Ethereum has been around for several years, but many have never heard of it. Those that have invested in it or followed Ethereum’s development have wild volatility. However, there are reasons to be hopeful that Ethereum will feature in the future of cryptocurrency investment:
- Ethereum is not restricted to the 21-million-coin cap like Bitcoin.
- It provides faster transaction speeds (under 15 seconds, compared to Bitcoin’s 15 minutes).
- Its technological advantages include escrow ability.
If all cryptocurrency does well, so should Ethereum. Given that Ethereum is being traded for much less than Bitcoin, it may offer a good alternative for beginner investors and those looking to diversify.
While there have been some devastating drops, many believe that Ethereum’s steady growth will continue.
Future of Altcoins
Bitcoin and Ethereum are only two of thousands of altcoins available in the digital currency marketplace. It is easy to see why investing in altcoins has become so popular. Many of these currencies have done extraordinarily well over the years, albeit with a fair amount of volatility as the concept develops.
Bitcoin was around $100 in 2013, and as of January 2021, it is over $30k, with an expectation of being over $50k by year-end.
Ethereum has traded from under $2 to over $1,400. You only need to look at the crypto trading exchanges to research various altcoins and see their performance. Here are some to watch for the future of cryptocurrency:
There is also a plethora of online learning opportunities about investing in cryptocurrency. You can see how it works and be well-informed before investing in altcoins on sites like Coindesk, Cryptohead, subreddits dedicated to crypto, etc..
Altcoins categories include:
- Mining-based coins, mined or purchased (Ethereum is an example)
- Stablecoins, pegged to an asset to reduce volatility (Facebook’s Libra is an example)
- Utility tokens used to gain access to a service (Filecoin is an example)
- Security tokens linked to a business
The future of altcoins is a mixed bag with winners and losers like any investment category. The overall environment of altcoins is favorable, but it pays to add to your education as this fast-growing industry changes rapidly.
While it is unlikely that we would see an end to digital currencies, it is possible for some types to prosper and others to fail.
Investing in cryptocurrency has all the uncertainty of stocks, bonds, real estate, and other mechanisms. Your investment could be lost, provide less than an acceptable return, or grant you immense wealth and prosperity—it is about wise management, patience, and market conditions.
The potential future of cryptocurrency needs to consider many factors, including a growing catalog of available choices. There are hundreds of cryptocurrencies, from mere pennies to thousands of dollars. It is best to take great care before adding any cryptocurrencies to your financial portfolio.
A good recommendation is the same strategy as investing in the stock market: diversify. If you choose multiple cryptocurrencies, there is a statistically improved chance that you will enjoy a net profit.
Obtaining Bitcoin or other altcoins isn’t only an investment platform, though. The idea is that you can also use it like regular currency with any company that accepts that altcoin. If you are looking to obtain altcoins for this purpose, your main goal is to choose one that you expect to retain its value by the time you plan to spend it.
Whether you obtain cryptocurrency for completing purchases or as an asset, this fast-growing industry can be rewarding and captivating. There are many applications for this concept on the rise, so a positive expectation for the future of cryptocurrency is likely.
What do you think—is cryptocurrency the future?