‘Cryptocurrency is a scam and will die a natural death.’ These were the words of renowned economists in 2013 when Bitcoin was hovering around $350, and they have kept saying it till this present day. Bitcoin’s 10,000% increase in value has come back to haunt those that said it. While this further puts more credibility on cryptos, let’s look at how it happened and what would make cryptocurrency as commonly accepted as Fiat or Gold.
History of the Cryptocurrency Market
Did you know cryptocurrency did not start in 2009? You probably didn’t. Bitcoin launched in 2009 and became the first mainstream cryptocurrency, but before that, hundreds of algorithms have been put in place to allow anonymity and decentralization.
The foundation of cryptocurrency goes back to the early 1980s when an American cryptographer named David Chaum created an algorithm that ensured secure, immutable information exchanges between two or more parties. This was one of the basic elements our modern-day cryptocurrencies operate on.
Since Bitcoin, hundreds of cryptocurrencies have been introduced into the economy, with each one being a slight variant of Bitcoin. We have Ethereum, Litecoin, Dogecoin, and others classified under the generic name “Altcoins.” While many of these cryptocurrencies have multiplied in value, there has been a major consolidation recently. Let’s look at what caused the price hikes of cryptocurrencies (majorly Bitcoin) in the recent past.
Major Reasons Responsible for Crypto Price Hikes
One way or another, cryptocurrencies are finding their way into our traditional life. This, in turn, ensures more credibility. The more people view a thing as credible, the more they want to be a part of it. A good example is Coinbase and Coinbase Pro. Four years ago, who would have thought a cryptocurrency exchange would be a publicly listed company? Coinbase was the first crypto exchange to go public, and this news played an important role in driving the price of Bitcoin from $24,000 to a little over $60,000. People who knew about traditional investing but not about cryptos would know about it because of this public offering.
Another example is Tesla. a few months ago, Elon Musk announced that Tesla would accept Bitcoin as a payment mode. This news drove Bitcoin through a very strong upward trend. As more cryptocurrencies are incorporated into our normal lives, the prices reflect the exposure.
The Feds can print new notes of the fiat currency, and new mines of gold can be found increasing the supply, but the total supply of Bitcoin is constant, i.e., 21 million. Not all 21 million Bitcoin has been released yet, and the current circulating supply of Bitcoin is around 18.8 million. According to the experts, the last Bitcoin will be released in 2021, and this process of gradual release of the new coins is called Bitcoin Mining.
Mining involves offering rewards to miners for verifying the new transactions and maintaining the blockchain. Every four years, the rewards are halved automatically, and this gives more room for extra scarcity. With more demand for Bitcoin (more people getting introduced to the crypto world) and a fixed supply, the price of Bitcoin has spiked in recent times. Since most cryptocurrencies follow Bitcoin, the same logic can be applied to them too.
With these two being the key reasons why cryptocurrency prices have increased in times past, why isn’t the increase continuous? Let’s look into that in a moment.
Problems Preventing Crypto From Going Mainstream
There are fears that government regulations can spread FUD (Fear, uncertainty, and doubt) to the cryptocurrency market. Most governments are either critical of it or indifferent about it. While cryptos are decentralized and anonymous, governments still have the edge over them. For instance, South Korea banned cryptocurrency trading some time ago, and the same is true with China.
Being a digital currency, it is expected that cryptos would experience breaches from hackers. In times past, we have seen initial coin offerings and exchanges experiencing hacks and tokens stolen from people’s wallets. Most players in the industry are now using stiff measures for security, but the threat remains.
With increasing clamors for a green world, global warming, and diversification from energy-consuming items, cryptocurrencies would need to innovate from this trend. We have seen most projects use a ‘Proof of Stake’ system instead of a ‘Proof of Work’ to validate transactions. The former is less energy-consuming and seems like the future trend should cryptocurrencies become the norm.
What then would become of cryptocurrencies in the future? Is there any hope? Let’s dive into a few things that would cause cryptocurrencies to go mainstream.
The Future of the Crypto Market
PayPal and Tesla are two of the many global corporations adopting cryptos as a mode of payment. A few other adoptions from companies in different industries would push the price of cryptocurrencies higher. It’s yet to be seen when this would happen, but with some companies buying Bitcoin to hedge against the dollar, cryptos would in no time serve as a primary means of payment.
For reasons unknown, the US government has not said derogatory remarks about cryptocurrencies, and they are even arresting owners of scam projects. While this hasn’t directly affected the price of cryptos, there are rumors that the US government is looking at the workability of cryptocurrencies in the world economy. A positive statement from any high-ranking official would depict acceptance and push adoption further.
Cryptos as a Mode of Investment
Apart from savings, there are a few investment options available for interested individuals. Stocks, bonds, real estate, and annuities are major among these options, and many of them seem outdated to Gen Z and Gen Alpha. Does cryptocurrency fill this gap? Yes, it sure does.
With more stability and less volatility, we are more likely to see widespread adoption of cryptos from small, medium, and big enterprises. Either as an investment option or a means of exchange, cryptocurrencies are here to stay and would gain a more streamlined identity over time. Would you want to miss out on this revolutionary discovery because of a few negative opinions? We would say no. Cryptos are still very early, and we recommend you be involved in this exponentially growing market while gaining more knowledge about it