The Rise of Cryptocurrency and Its Impact on the Financial Industry
Cryptocurrency is a form of digital or virtual currency. Cryptographic systems secure the coins, and people can use these systems to make safe online transactions without an intermediary. No country or government authorities regulate Cryptocurrencies; therefore, governments don’t intervene in Cryptocurrency transactions. According to Blockchain technology, most of the cryptocurrencies in use are decentralized networks.
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People buy Cryptocurrencies from Cryptocurrency exchanges, mine them, or receive them as a reward for completing tasks on the Blockchain. However, not every e-commerce permit purchases using Cryptocurrencies, and you will hardly see any retail business allowing payments using Cryptocurrency, not even the popular ones like Bitcoin. Nonetheless, Cryptocurrency values have made Bitcoins popular as investing and trading instruments. Although some countries may not accept it, people sometimes use Bitcoins for cross-border transfers
The Rise of Cryptocurrency
Cryptocurrency shifted from an academic concept to a virtual reality in 2009 after the creation of Bitcoin. While Bitcoin saw a mass, consistent following in the subsequent years, it also caught the attention of investors and media in April 2013, when it recorded its highest of $266 per Bitcoin after surging ten times in the preceding two months.
Bitcoin recorded a market value of more than $2 billion at its highest. However, it also recorded a 50% plunge shortly after, which sparked a hot debate about the sustainability of Cryptocurrencies in general and Bitcoin specifically.
The Cryptocurrency market has recorded notable positivity because of the simplified microeconomic activities, which have increased the crypto price. Besides, the current trading volume of the Crypto market has risen to the highest mark since June 2021. The daily market volume is approaching $70 billion, while the Crypto market capitalization is $1.20 trillion.
Impact of Cryptocurrency on the Financial Industry
As a part of Cryptocurrency, Bitcoin can potentially dismantle a banking system. The main impacts Cryptocurrency has on the financial industry are:
• Cryptocurrency eliminates double spending. Each Bitcoin is unique, and cryptographically protected. The currency cannot be replicated or hacked. Therefore, you can neither spend the Bitcoin twice nor have it counterfeit. These features are making it more and more attractive in the financial industry.
• Even if the Bitcoin network is decentralized, it is still trustworthy.
• Bitcoin has such a strong network that it makes centralized infrastructure unnecessary. The currency is produced and distributed through a streamlined process.
Challenges and Future of Cryptocurrency
Some economic analysts are already predicting significant changes in the Crypto market as institutional money enters the market. Furthermore, Crypto will likely be floated on the Nasdaq, increasing the Blockchain’s credibility as an alternative to conventional currencies. According to some experts, investing in Bitcoin would be made easier with the availability of a verified exchange-traded fund specifically for cryptocurrencies. However, investors will still be concerned about investing in such digital assets, even if the exchange-trade fund is created, due to the lack of understanding of Crypto; this means the desire will automatically arise.
If you wish to invest in Cryptocurrency, use the same process when considering any other speculative investment. There is always risk of losing some or all your investment, and Cryptocurrency has no permanent benefit apart from what a buyer will pay when a case arises. The currency is susceptible to price swings increasing the chances of loss to an investor.
Some of the challenges Cryptocurrencies are facing:
• A computer crash or hackers ransacking a virtual vault can delete one’s digital fortune. Unfortunately, the current technology has not been able to counter such instances.
• The more popular the Cryptocurrencies become, the more likely they are to face government regulations and scrutiny, which may wear down the fundamental premise of their existence.
• Cryptocurrencies are for the technically adept. Most businesses have embraced Cryptocurrency but still need to work on increasing consumer acceptance.
• Cryptocurrency will likely be highly regulated in the coming years, which may give way to alternative currencies. Cryptocurrency must be mathematically complex to prevent hackers from accessing the systems, yet easy for consumers to understand. Crypto needs to be decentralized but with adequate protection and anonymity without being a means to evade tax, money laundering, and other notorious activities.
Conclusion
The rise of Bitcoin has led to a debate concerning its future with other Cryptocurrencies. Although Bitcoin has faced diverse issues, its success since its launch in 2009 has led to the creation of alternative Cryptocurrencies such as Ripple, Ethereum, and Litecoin. Therefore, Cryptocurrency will need to satisfy wildly divergent criteria and overcome its challenges to attract more investors and maintain credibility with the current users.
Article Source:
What the future holds for cryptocurrencies | World Economic Forum (weforum.org)
The Rise of Cryptocurrency and its Impact on the Financial Industry (fidomoney.com)
Where Is the Cryptocurrency Industry Headed in 2021? (investopedia.com)
