Any random Google search will tell you about the promising future of cryptocurrency. When the coins max out on one whimsy statement, you will find that Bitcoin’s value will increase exponentially. Thus, if you invest now, you may become a billionaire by 2050. How cool is that?
Let me burst the bubble for you. Pop! In actuality, what is the future of cryptocurrency? If truth be told, are the prospects that bright? No one would have doubted that in November last year when the BTC’s value reached its all-time high of almost $70,000. However, it has depreciated by 70% and is worth only $20,000! And not only BTC, Ethereum, and various other altcoins have witnessed a depressing spiral. In May, the dollar-pegged altcoin Terra Luna crashed, sending shock waves through the crypto world. Several cryptocurrency firms had to file for bankruptcy afterward!
But cryptocurrencies are volatile, which means they can make the ascent in the blink of an eye. Who knows what the future might hold? We can only speculate. Read on to find the cryptocurrency future.
Factors that may Determine Cryptocurrency Future
Recent BTC and altcoin trends have sparked much speculation and debate about where cryptocurrency is going. Is it a money-making machine or a bubble that can pop anytime? Here are only some of the factors that might shape its future:
- Cryptocurrencies are highly volatile. Some investors may not stomach that well because seeing your money drain down with the descent of a few red bars can injure a happy man.
- BTC and most other altcoins do not have anything backing them up. They are inconvertible, and their value depends exclusively on the average investor’s willingness to pay. So it just might be a bubble after all.
- The user anonymity feature enables cryptocurrencies to be used in the black market. It is also used on the Dark Web and can prove to be an instrument for tax evasion.
- A computer crash or virus injection may result in the erasure of investments.
Potential Regulations
Investors hate uncertainty. Like any other investment, cryptocurrency can be risky. It does not incur any actual loss not until you draw your money out, but it can make you wait for far too long. And not all investments are long-term.
Since November last year, Bitcoin has shed most of its value, and the short-term prospects are not that good. Now, any investor who might have had optimistic views for the future would no longer be able to draw out his money. Owing to the volatile nature of cryptocurrencies, the Biden administration advised government agencies to plan for the regulation of digital currency.
Marcus Sotiriou, a market analyst at GlobalBlock, said, “After the catastrophic events that have unfolded in the crypto market over the past few weeks, it is clear that stringent regulation could arrive soon.”
Furthermore, digital assets companies like Three Arrow Capital had to file for bankruptcy, and many more had to dismiss their staff. Also, due to the crash of Luna, many people had to witness whole wallets containing their investments vanish.
By letting cryptocurrencies be decentralized, governments run the risk of tax evasion and money laundering. In the US, such predisposition toward illegal undertakings has attracted the attention of FinCEN (Financial Crimes Enforcement Network), the FBI, and the DHS. Many crypto firms were directed to establish stringent policies against money laundering.
In light of such circumstances, the “lawless” currency is to face oncoming regulations. The Securities and Exchange Commission Chairman, Gary Gensler, has implied that the bureau would take measures “in policing the industry.”
These regulations of different governments from around the world can be a good thing for the future of cryptocurrency. The industry has grown beyond the limit of operating on a decentralized system. There is no possible way to redeem your money if, by luck, you send the wrong amount of money to the wrong person. Therefore, it is riskier to invest in cryptocurrency than in conventional investments. Regulations might help overcome that. A central authority can ensure lesser fluctuations in value and safer investments. It can also safeguard user transactions and provide more options in case of cyber theft.
Adoption of Cryptocurrency
In 2021, El Salvador adopted Bitcoin as its legal tender, and the Central African Republic followed a year after. Dogecoin is an acceptable payment method at Tesla and various Starbucks franchises. As the decade ages, cryptocurrency is changing its face and may not be five years later than it is now. Predictably, the coming years will see an increase in this trend. And possibly, its ongoing success and pervasiveness will ensure that it is regulated by the companies on a large scale, even if it is for increased security’s sake.
One setback is that it would undermine the anti-interventionist philosophy. The goal of Bitcoin’s creation was to provide a form of financial freedom free of government intervention. Having companies do the government’s bidding will undermine that.
Conclusion
The industry is only emerging, but it has potential. Cryptocurrency’s future depends on many things, but it’s hard to say what it will be like. Many companies, or even countries, might adopt digital currencies, implement checks and balances, or alter the policy, but that still does not portray how it will turn out because crypto geeks may not like to rid of the decentralized system.
On the one hand, regulations might be beneficial, but on the other, they can bridge the gap between cryptocurrency and fiat money. In the process, taking it farther and farther away from its intended aim. However, when investing in crypto, “invest only what you are prepared to lose.” It is still a gamble and will not fix any time soon because the interested parties still lack clear guidelines.
