“So my view’s quite clear.
I believe cryptocurrencies, bitcoin is the first example,
I believe they’re going to change the world.”
by Richard Brown (Executive Architect at IBM)
Bitcoin and other cryptocurrencies have already made a statement in the financial sector. Not a day goes by when one does not hear or read about cryptocurrencies. Many people believe it to be the greatest innovation. Recent bitcoin crashed after crypto exchange got hacked! Bitcoin fell more than 10% on 11th June’18. The combined market capitalization of the largest cryptocurrencies has dropped over $387 billion this year. It is a decline of over 53% and this is not the worst. Today, 90% of these cryptocurrencies are worthless.
When we look at the past reports, digital cryptocurrency overall has had its fair share of failures as well. But despite this decline in the value, many people still believe cryptocurrency has a bright future. Kevin Murcko, CEO of CoinMetro, stated his belief that cryptocurrencies are still developing and that there is more we’ll see in the cryptocurrency space.
The future of cryptocurrency
Will 2018 be profitable for investors? Let us see the future of cryptocurrencies. Cryptocurrency has had its ups and downs. The trends of cryptocurrencies market will give us intelligent predictions.
Patronage from institutional investors
Some institutional investors are investing in bitcoins and other cryptocurrencies, others are diligently watching the market trends. More and more Governments are looking forward to regulate cryptocurrencies. Investors are now comfortable investing their funds. Tim Draper, an investor boldly predicted that Bitcoin would achieve a value of $250,000 per coin by 2022.
With added regulations, investors can invest easily without anxiety. Many investors consider cryptocurrencies as a viable asset but the growth is gradual.
A survey conducted by a cryptocurrency exchange platform called Encrybit, claimed 40% of the participants admitted security as a major concern! Hackers have already taken security issues as an advantage. The increasing difficulty of Bitcoin mining process forced miners to get into pools to harmonize their computational power. Increased number of miners made pool powerful. This can manage to command over 50% of the mining power and poses a threat to Bitcoin’s network. If a group get so much power, they can manipulate transactions!
Therefore, there are attempts to regulate cryptocurrency. Blockchain technology can be successful if the security is not compromised!
There are many factors that keep digital currency volatile! No matter how many measures we take to stabilize it, cryptocurrency is still volatile in nature. Some following factors keep digital currency volatile:
- The currencies’ lack of intrinsic value since we cannot predict crypto values.
- The lack of institutional capital.
- The implementation of thin-order books.
As cryptocurrency trading is becoming more popular, we should be seeing fluctuations in the flow of volatility. While some investors will benefit from the sudden increases but we should also be careful about the possibility of a sudden crash! Because of the volatile nature of the cryptocurrency, investors need to plan well.
Like any other technology, Bitcoin also has its hype cycle. It focuses on the behavior of investors during the phase.
In this stage, Bitcoin is accumulated by early investors and traders. People who started early knew about the blockchain technology and the power of a decentralized currency. During the first, it was not that popular.
In the second stage, rising cryptocurrency price draws public attention. More people started investing in it and the price starts climbing further.
A lot of retail investors started investing in Bitcoin because of a rise in value. Increased users and the increasing media coverage drew more media attention. A lot of popular entrepreneurs and analysts started making statements.
Post the peak, there was sudden fall in the value because of Bitcoin crash. During this downfall, only the long-term believers of Bitcoin and supporters continue to invest in it.
Will it stay?
The best thing about blockchain technology and cryptocurrencies is that they are not centralized. No rich people, or the government or any banks have a complete power. Cryptocurrencies are not driven by any government or Banks. This might be an advantage but every coin has two sides.
Since digital currencies are decentralized, transactions are anonymous. It is next to impossible to track fraudulent activities and illegal transactions.
Also, read Is bitcoins really secure?
It will ultimately depend on how well these digital currencies compete with already established payment methods like cash, debit and credit cards, PayPal, etc. There are many problems which are not solved yet.
- One is scalability.
- Expenditure related to computational power.
- Security of the transactions.
- Illegal Activities.
- No backups.
There is no central bank involved which can adjust the supply of bitcoin in crisis. Therefore, bitcoin’s value can swing sharply with higher demands. With cryptocurrencies, we have bypassed the use of a mediator but let’s see what future holds for virtual cash. We are all beginners. But people who have understood the blockchain technology and cryptocurrency can make a huge profit out of it.
Tech-savvy and a passionate blogger. I have done software engineering from the University of Mumbai. Technology Specialist 2.0 in DOT NET. I also have my personal website http://glamourbytes.com/