What is the future of cryptocurrencies?
Bitcoin, the first and most successful cryptocurrency in terms of market value, was first invented in 2009. Ever since, it has lead the crypto market by the nose. In 2017, Bitcoin's price ballooned up to over $20,000.
Every investment guru warned of a crash following this exponential but unsustainable growth. Weeks later, the balloon popped. Bitcoin's price crashed to as low as $3,500. The whole of the cryptocurrency market followed in Bitcoin's steps and the survival of the crypto space became a question.
Two years later, the industry is in the process of rising from its ashes. Today, Bitcoin's price rests around $8,500. While cryptocurrencies attempted a comeback, blockchain - the underlying technology - stepped into the spotlight.
Many of the Fortune 500 companies such as Samsung, Walmart, Amazon Web Services, Unilever, and IBM revealed their plans to implement blockchain into their operations and services. Furthermore, we saw a lot of innovation and progress when it comes to blockchain adoption into the mainstream industry.
What does the cryptocurrency future hold?
We are now in a weird place when it comes to the future of cryptocurrencies and blockchain. Everyone thought 2018 was going to be the end of cryptocurrencies. Yet, they are still here, introducing new services and improving upon older ones. The cryptocurrency trade market is going through a boom right now. Many big mainstream companies are adopting blockchain technology. Does this mean we are still on track for a future where cryptocurrencies become the norm? Will the US dollar be replaced by Bitcoin in the coming years? Will you be able to pay for your groceries using crypto? Let's take a realistic look at what the future of cryptocurrencies will look like.
As cryptocurrencies gain popularity as a viable source for transfer and store of value, governments and regulatory bodies will want control over them. Many countries such as India, Canada, Saudi Arabia, and Iran have already partially or fully banned the use and mining of cryptocurrencies. At the same time, countries such as Thailand, France, Germany, and Japan offer an encouraging environment for cryptocurrency and blockchain-based businesses.
Clearly, the regulatory bodies of the world countries have still not figured out how to regulate the crypto space without hindering the way of innovation and progress. The worst example of this is seen whenever there's any scandal involving cryptocurrencies. It seems the only way regulators know how to react to such stories is by outright banning anything crypto.
The split in approach towards regulation of cryptocurrencies will not be going away anytime soon as the regulatory bodies don't seem eager to introduce comprehensive legislation that can pave the way for growth and progress in the crypto industry while also making the mass use safer.
The Gaming Industry
The gaming industry is one of the largest and fastest-growing entertainment industries. It is also one of the sectors that are most comfortable with the idea of a digital currency that's native to an environment. Many game studios have already announced their plans to introduce their own tokens.
Ubisoft, Microsoft, Atari, Sony, Epic Games, and Unity are all big names from the gaming industry that are already working on or have plans to adopt blockchain technology in the near future. The use case for blockchain and cryptocurrencies in the gaming industry is ideal and warrants its own discussion. We will see the integration of crypto and blockchain into video games become a norm in the next few years.
The Scaling Problem
For the people who are actively using Bitcoin and other cryptocurrencies, the scaling problem has been a cause for concern. Bitcoin's bottleneck when it comes to parsing many transactions simultaneously has been cited many times as a case against its use in the real world.
Bitcoin can infamously only process 7 transactions per second. Bitcoin's direct competitive in this case is Visa, which is capable of processing hundreds of thousands of transactions per second. In the coming months, we will be seeing a lot of focus on solving the scalability issue by many different currencies.
In the coming years, we are going to see a lot of sovereign nations release their own crypto tokens. Governments such as these of Venezuela, China, and the European Union are already in various stages of developing their coins. After crypto tokens are launched by such massive economies, other countries will quickly follow in their footsteps.
However, these cryptocurrencies will not be decentralized as Bitcoin and other digital tokens are. They will be under the control of the respective government in some shape or form. This will introduce a new class of centralized public cryptocurrencies with the backing of huge economies. It will be interesting to see the competition between the two and which class attracts more attention from investors and traders.
One of the major concerns that investors and traders have about cryptocurrencies is their price volatility. Bitcoin has seen extreme shifts in its price within minutes, days and weeks. However, there's been a growing trend in recent times for trade of crypto-based derivatives and futures through decentralized cryptocurrency exchanges.
As more and more traders get involved in the crypto futures trading, it could help grow the confidence in crypto prices and, in turn, stabilize them. Furthermore, an expanded trade portfolio will help cryptocurrencies desensitize themselves to the outside factors. As is, any bad news about a big company involved with crypto or any news of a hack can completely crash the crypto market. With a wider trading portfolio, cryptocurrencies could detach themselves from such events and gain investors' trust.
It is an interesting time for cryptocurrencies. Big changes are coming. Growth in crypto futures trading, new regulations, national cryptocurrencies and mainstream adoption all have the potential to greatly benefit the cryptocurrency market. As we go into 2021, there's a lot to look forward to in the coming months. Let's hope for the best and hold!