Bitcoin price surged to an all-time high this year, and for the most part, it was due to the fact that EV giants Tesla added bitcoin to their balance sheet. Not only them but payment providers Square and MicroStrategy, a business intelligence company, too did the same. Therefore, the price of the bitcoin soared. Now, even though bitcoin is pretty valuable, the question remains, is it here to stay, or is it just a price bubble?
Before diving into what the future holds for cryptocurrencies, let’s digress a bit into what it actually means. Cryptocurrencies are a form of digital asset that an individual can use as a medium of exchange. The records about the ownership of the coins are stored in a computerized database and are designed to be free from government control. However, due to their foray into the mainstream market, this aspect has indeed come under fire.
The word crypto here means that complex cryptographic algorithms are used for the creation as well as the processing of digital assets. Cryptocurrencies are distributed or managed through blockchain technology in a peer-to-peer network. Basically, decentralization has been achieved through the use of blockchains. So, to sum it up, Cryptocurrencies are the form of digital assets whose records are transparent, secure, and for the most part free from government control.
As for bitcoin, it is a type of cryptocurrency that currently has the highest exchange rate. Helped by the fact that Elon Musk tweeted that Bitcoin is a good thing. Bitcoins are basically computer files stored in digital wallets and are transferable. One can get bitcoin exchanging it for real money, allowing someone to pay you for things using Bitcoin, or one can try mining it. Mining bitcoin means that people use their computers to process bitcoin transactions. It might sound easy but the reality is quite different. That’s because the complexity involved in processing the transactions means one needs a powerful computer to mine bitcoins. Furthermore, it might take a significant amount of time before you are rewarded with a bitcoin for your troubles.
To understand what the future holds for cryptocurrencies, one must understand what led to their rise. In the aftermath of the 2008 financial crisis, it became increasingly certain that the traditional financial system is not reliable. Furthermore, in this system, significant power is held by a few higher-ups. So, in order to find a more efficient means of executing transactions that have a high level of transparency and accountability, cryptocurrencies came into being.
A highly innovative system that is powerful enough to disrupt the traditional financial structure. That is what cryptocurrency is. They offer a lower transaction cost. Thus, this is another reason why they gained so much popularity. Now, the future of these digital assets primarily depends upon four major conditions. There must be an appropriate technology, a higher demand level must be there, corporate champions are a necessity, and finally, a regulatory environment must be there.
Due to the high level of complexity involved in cryptocurrencies, those that are not technologically adept are likely to reject them. Furthermore, they are volatile as their price keeps fluctuating rapidly. Therefore, the general public will take some time to accept cryptocurrencies as a viable form of money.
Moreover, despite the transparency of there is a form of trust issue. That’s because cryptocurrencies are not regulated directly by any government. So, bypassing the regulatory bodies people may start using cryptocurrencies for tax evasion and money laundering. This is a great problem for the advocates and creators of cryptocurrencies as they have to find a way to keep everything anonymous and at the same time control the aforementioned problems.
E-commerce platforms will hold a major share in the cryptocurrency market. If it continues to boom, cryptocurrencies will be taken as the primary form of digital payments. It will make it easier for them to conduct cross-border transactions with less hassle and more security. Furthermore, e-commerce platforms will likely take over the traditional market system and it makes sense that they will become the early adopters in the major market.
However, the main problem that is to be tackled is government intervention. They would not like to lose control of the money supply. Therefore, they will do all that they can to stop or bring all the cryptocurrency transactions under their regulations. Currently, cryptocurrencies are not considered a legal form of financial tender. So, it is still a long time before our country eases up to them.
To sum it up, cryptocurrencies are most probably going to keep booming. So, it shouldn’t be long before all of us start using them. However, one major barrier to it becoming mainstream is the government regulations. So, if proper policies are made, then we will certainly see more mainstream adoption of cryptocurrencies.