“Cryptocurrency is a scam and will die of natural causes.” Those were the words of renowned economists in 2013 when Bitcoin hovered around $ 350, and they say it to this day. Bitcoin’s 10,000% increase in value has returned to haunt those who said it. While this adds even more credibility to cryptos, let’s look at how it happened and what would make cryptocurrencies as widely accepted as fiat or gold.
History of the cryptocurrency market
Did you know that cryptocurrency didn’t start in 2009? You probably didn’t. Bitcoin was introduced in 2009 and became the first mainstream cryptocurrency, but before that, hundreds of algorithms were introduced to enable anonymity and decentralization.
The basis of the cryptocurrency goes back to the early 1980s when an American cryptographer named David Chaum developed an algorithm that ensured a secure, unchangeable exchange of information between two or more parties. This was one of the basic elements that our modern cryptocurrencies work on.
Hundreds of cryptocurrencies have been introduced into the economy since Bitcoin, each being a slight variant of Bitcoin. We have Ethereum, Litecoin, Dogecoin, and others classified under the generic name of “Altcoins”. While many of these cryptocurrencies have multiplied in value, there has been a great deal of consolidation recently. Let’s look at what caused the price increases of cryptocurrencies (mainly Bitcoin) in the recent past.
Main reasons for crypto price increases
One way or another, cryptocurrencies are finding their way into our traditional lives. This in turn creates more credibility. The more people see something as believable, the more they want to be a part of it. A good example are Coinbase and Coinbase Pro. Who would have thought four years ago that a cryptocurrency exchange would be a publicly traded company? Coinbase was the first crypto exchange to go public, and this news played a major role in driving the price of Bitcoin from $ 24,000 to just 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 means of payment. This news propelled Bitcoin through a very strong upward trend. As more and more cryptocurrencies become part of our normal lives, prices reflect exposure.
The Feds can print new fiat currency notes, and new gold mines can increase the supply, but the total supply of Bitcoin is constant, or 21 million. Not all 21 million bitcoin have been released yet, and the supply of bitcoin currently in circulation is around 18.8 million. The last bitcoin will be released in 2021, according to experts, and this process of gradually releasing the new coins is known as bitcoin mining.
In mining, miners are offered rewards for checking new transactions and maintaining the blockchain. Every four years the rewards are automatically cut in half, leaving more room for additional scarcity. With a growing demand for Bitcoin (more people are being introduced to the crypto world) and a steady supply, the price of Bitcoin has skyrocketed recently. Since most cryptocurrencies follow Bitcoin, the same logic can be applied to them as well.
Since these two are the main reasons why cryptocurrency prices have increased in the past, why is the increase not continuous? Let’s take a look at that in a moment.
Issues 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 or indifferent to him. While cryptos are decentralized and anonymous, governments are still ahead of the game. For example, South Korea banned cryptocurrency trading some time ago, and the same goes for China.
Since it is a digital currency, cryptos are expected to be breached by hackers. In the past, on early coin offerings and exchanges, we’ve seen hacks and tokens stolen from people’s wallets. Most of the industry players are now applying strict security measures, but the threat remains.
With the increasing call for a green world, global warming and diversification of energy-consuming items, cryptocurrencies would need to innovate from this trend. We have seen that 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 to be the future trend should cryptocurrencies become the norm.
What would then become of cryptocurrencies in the future? Is there hope? Let’s dive into a few things that would make cryptocurrencies mainstream.
The future of the crypto market
PayPal and Tesla are two of the many global companies using cryptos as a means of payment. Some other adoptions from companies in different industries would drive up the price of cryptocurrencies. There’s no telling when this would happen, but with some companies buying Bitcoin to hedge against the dollar, cryptos would be the primary form of payment in no time.
For reasons unknown, the US government has not made derogatory remarks about cryptocurrencies, and they are even arresting owners of fraud projects. While this hasn’t had a direct impact on the price of crypto, rumors exist that the US government is investigating the viability of cryptocurrencies in the global economy. A positive statement from a high-ranking official would represent acceptance and drive acceptance further.
Cryptos as a form of investment
In addition to saving, there are a number of investment opportunities available to interested private individuals. Stocks, bonds, real estate, and annuities are the most important of these options, and many of them seem out of date for Gen Z and Gen Alpha. Does cryptocurrency fill that void? Yes it sure does.
With more stability and less volatility, it is more likely that cryptos will be widely used by small, medium, and large businesses. Cryptocurrencies are there either as an investment option or as a medium of exchange to stay and would gain a leaner identity over time. Would you like to miss this revolutionary discovery because of a few negative opinions? We would say no. Cryptos are very early days and we encourage you to get involved in this exponentially growing market while gaining more knowledge about it