Cryptocurrencies will rise – Like it or don’t
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The previous year was a great year for cryptocurrencies. The hype was unparalleled, and this has caused what some people called “cryptomania” towards the end of 2017. As the new year began, however, people became increasingly worried about whether the so called bubble would burst. The first few months saw a decrease in the value of cryptocurrencies, especially in the focus -> Bitcoin, still the most popular cryptocurrency at the moment.
This might have discouraged investors, but there are more than enough reasons to believe the opposite. In fact, “experts” believe that this and the following years might actually turn into the biggest chance for cryptocurrencies, while a wall of scpeticism still remains.
*As mentioned in previous articles, this is no investment advice!*
Let’s face reality, any moron these days can setup an ICO, tell you a great story and concept and wait for your coins to come in! While the rise of the popularity of initial Coin Offerings (ICOs) can be attributed to its lack of regulation, the misconception that its regulation can only hurt the growth of the market needs to be cleared up. That might initially be the case, but one needs to look at the bigger picture to be able to understand the long term benefits such a development would bring.
The lack of regulation has resulted in the creation of several fraudulent ICOs and what is worse is that investors receive no form of protection against such offerings. The Securities and Exchange Commission has allegedly launched a probe to look into initial coin offerings (ICOs) and has already shut down “crypto-bank” AriseBank. Other governments made the move earlier, like Japan and Australia. The local markets did experience an initial crash, but the trends rose again after.
The industry will definitely change as it comes under closer scrutiny from both the public and the authorities, but it will make it a safer venue to conduct business in the end. The key here is balance. Systems must be put in place to ensure legitimacy, but they must be flexible enough to allow ICOs to operate in the manner that makes them so unique in the first place.
Startups that revolve around cryptocurrency have popped up everywhere. While the failure rate is indeed high at 46%, no other venue has provided an avenue for creativity and innovation as much as the industry has. Like startups, many fail to overcome initial challenges, but accounts of success often drown out failure stories. There is an undeniable bias towards businesses that survive and thrive. If these startups continue to do well and prosper, we are going to see an increase in the amount of users and merchants.
Fixing scalability and liquidity problems
Bitcoin, as the pioneer in the industry, still possesses the largest amount of users. However, it encountered problems when its user base expanded rapidly, and it wasn’t able to cope at the same pace.
One complaint against Bitcoin is that its transactions are pretty slow. It can only handle a handful of transactions at any given second, which is far from ideal when you have millions of users. To put things into perspective, thousands of transactions via card payments happen in a single second. Moreover, these transactions often have high fees and experience delays. While Bitcoin has implemented Segregated Witness or SegWit for short in late 2017, only a few users have shown interest in it. While the number of users is on the rise, it is not enough to get rid of the problem.
So, how will this problem be resolved? Simple. This can be addressed by using a second layer, peer-to-peer payment protocol on top of the blockchain. Lightning Network, for one, has been getting a lot of traction despite still being in its beta testing phase. If it works as it had been advertised, it would allow for off-chain transactions which will then speed up transactions, decrease costs and increase scalability. Other second layer protocols like Rootstock are also improving cryptocurrencies fluidity.
More legitimate ICOs
The fact that several big companies like encrypted-messaging application Telegram and photography technology company Kodak seem to have jumped aboard the blockchain ship signals a serious future ahead. This move will motivate other companies to launch their own tokens. In conjunction with the above item, these developments will encourage the growth of legitimate ICOs. This fact will also help Ethereum to grow. The growth will not be limited to Ethereum, of course, but because it is the primary platform for ICOs, development would likely be focused there.
Influx of institutional money
An increase in oversight and regulation will bring in legitimacy to cryptocurrencies and provide users more security. These, in turn, will encourage established financial institutions to partake in the space. As NASDAQ CEO Friedmann stated, a key roadblock for the Nasdaq and other institutional investors is regulation.
Exchange-traded funds (ETFs) are still awaiting approval by the U.S. Securities and Exchange Commission and plenty of people are hoping that it will happen sometime this year. This option would provide new investment options to people who would rather not buy and keep coins. Swap execution facilities (SEF) like LedgerX and alternative training systems (ATS) like tZero have also provided other investment options to this target market.
Today Nasdaq CEO Adena Friedman stated: “Nasdaq is open to becoming a cryptocurrency exchange”
Once the regulation is smoothed out and the space “matures”, Nasdaq would consider becoming a digital currency exchange, the company’s CEO told CNBC. Meanwhile, Nasdaq will support current existing crypto exchanges, and announced a technology deal with Gemini Wednesday.
Friedmann to CNBC:
I believe that digital currencies will continue to persist it’s just a matter of how long it will take for that space to mature. Once you look at it and say, ‘do we want to provide a regulated market for this?’ Certainly Nasdaq would consider it.
While the cryptocurrency ecosystem has already achieved an inflow of around $12 billion, institutional investors can bring even more funding to the table. If 2018 proves to be the year that institutional money begins to come flowing in, the market cap could possibly double at the end of the year.
But that is just a part of the story. “One in five financial institutions is considering trading cryptocurrencies within the next 12 months, a survey published by Thomson Reuters on Tuesday found. The survey covered more than 400 clients across Thomson Reuters Corp TRI.O (TRI.N) platforms including large asset managers, hedge funds and trading desks at the biggest banks. Thomson Reuters, the parent company of Reuters, provides data and news to the financial services industry”. (Source: Reuters.com)
Cryptocurrency Market Will Get “Much Bigger” Former JPMorgan Banker Daniel Masters stated, who led the JPMorgan’s global energy trading desk. Masters thinks that cryptocurrencies are fueling a financial revolution. He stated it’s about “what portion of the total financial ecosystem accrues to cryptocurrencies,” adding:
“I think even if it’s only 5% at the end of the day, that market will then still be much bigger than it is today.”
By the end of the year, the market might see a growth of up to sevenfold its present levels. Unlike the boom in 2017, such development would be founded on innovation and execution, instead of just plain hype. This would only lead to further progress in the coming years.
However, do remember that crypto investing is still a bit of a gamble game. Don’t get fooled by promises or so called experts as long as you don’t know their real background, intentions etc. Do your own research, check the internet and social media channels who the entertaining guy on YouTube really is you might listen to. Ask the the right questions and do some background checks. It’s your money you might risk!
Cryptocurrency has always been a volatile market that can bring high rewards if you play your cards right. Always keep your eyes open and do your own research. There are still potential risks that lie ahead, so always make sure to take them into consideration. Investment is always about making the right move under the given circumstances, so do not let yourself be blindsided on a quest for profit.
Only invest what you can afford to lose!