You’ve probably heard of Bitcoin. You may even have thought of buying a few cryptocurrencies. But, like the dot com boom of the 1990s, you are afraid the bubble might burst leaving you counting loses.
You ask yourself!
Are cryptocurrencies here to stay?
How will they evolve?
Will Bitcoin hit its previous highs?
Will the crypto market ever achieve stability?
Keep reading to find out the answer to these questions.
How did Cryptocurrencies come to Be?
The idea of a cryptographically encrypted digital currency has existed since the 1970s. It was only after the 2008 global financial crisis that the idea came to reality.
The frustration with the world financial markets provided the right conditions for Satoshi Nakamoto to introduce Bitcoin, the world’s first Cryptocurrency. Since 2009, more virtual currencies have been developed. Currently, there are over 2000 tokens and altcoins in the crypto market.
In their infancy, most cryptocurrencies were used for online transactions on the dark web. However, between April 2017 and January 2018, the crypto market experienced a drastic increase in value. In January 2018, the total market valuation of cryptocurrencies was $800 billion.
Then, prices started dropping.
Between January 2018 and January 2019, the total value of cryptocurrencies dropped by over $668 billion.
Recently, financial analysts have speculated on the future of cryptocurrencies. Some argue that the crypto bubble will burst, while others predict that cryptocurrencies will recover from the bear market movement.
Bitcoin will Remain the Top Cryptocurrency for Some Time
Whenever cryptocurrencies are mentioned, Bitcoin is always the first thing to come to mind. Its no wonder Bitcoin cheerleaders hold on to the argument that Bitcoin will remain the “king of cryptocurrencies.”
Despite dropping from $20,000 to below $3,400, Bitcoin is still the most popular cryptocurrency. As at press time, the Bitcoin market capitalization was of over 51 percent.
Bitcoin’s dominance arises from the fact that it was the first cryptocurrency. Bitcoin’s dominance in the digital assets ecosystem has made its price a major determinant for altcoin prices.
Although it may remain unchallenged for some time, Bitcoin’s popularity may stagnate, paving the way for another cryptocurrency to take over.
Ripple Might Take Over as King of Cryptocurrencies
The 2018 bear market movements resulted in a decline in the value for all cryptocurrencies. Ripple, however, managed to surpass Ethereum as the most popular altcoin by market cap.
Ripple’s dominance in the altcoin market came after the launch of the xRapid platform. xRapid is a liquidity solution that allows faster and cheaper cross-border money transfers.
The money transfer solution has attracted financial conglomerates, and banks, which has driven up Ripple’s market capitalization.
The use of Ripple’s distributed ledger network in a practical environment will likely attract more institutional investors.
The entrance of these institutional investors may result in exponential growth of the altcoin and finally overthrowing Bitcoin as “king of crypto.”
Stable Coins May Replace Fiat Currency
Cryptocurrencies are still in the infancy stage of adoption; thus, very volatile. This volatility is a major reason behind the high profit and loss margins that investors have been experiencing.
Stablecoins were introduced to provide stability in the crypto market. Stablecoins are digital currencies whose value remains relatively constant. This stability is often achieved by pegging a cryptocurrency against a fiat currency, or a precious metal.
However, fiat currency backed stablecoins are subject to the consequences of monetary policy actions. Government activities may also devalue the fiat currency, which in turn devalues the stable coin.
Gold-backed cryptocurrencies are however a more stable source of value.
What makes gold different?
Gold is a precious metal. It’s also rare; therefore, less likely to lose value. The use of gold-backed cryptocurrencies could result in stablecoins replacing fiat money.
Decentralized Cryptocurrency Exchanges Will Take Over
Despite decentralization being an underlying feature of blockchain and cryptocurrencies, most crypto exchanges use centralized networks. Centralization has made crypto-exchanges a target for hackers, and data breaches.
Crytopia Exchange is an example of a centralized crypto exchange that was recently hacked into, and money was stolen. Centralized crypto exchanges are also prone to government regulation.
In the future, all cryptocurrency exchanges will adopt a decentralized exchange. DEX exchanges would allow increased transparency and security of data.
However, DEX exchanges have not been perfected as they are often slower and more expensive to use.
Increase in Institutional Investment Will Result in Widespread Adoption of Cryptocurrencies
Early crypto investors were enthusiasts who religiously believed in cryptocurrencies and decentralization. Wall Street, financial institutions and other big-money investors were late to the party.
In its early stages, financial agencies and governments denounced cryptocurrencies. They advised citizens to avoid investing in the unregulated crypto market.
However, a decade after this harsh reception, more financial institutions and governments are changing their attitudes towards cryptocurrency and blockchain.
The entry of Social Media Giant Facebook and American top financial institution JP Morgan bank to the cryptocurrency market heralds a new era for cryptocurrencies. More big-money investors are likely to start putting their money in cryptocurrencies.
The entry of institutional investors will give rise to the final stage of crypto adoption, “the Burst stage. “
Cryptocurrencies are an interesting case study. Predicting what may happen in the next few years is impossible.
There are those who argue that like the dot-com companies, the crypto bubble will burst. On the other side, there are those who believe that digital currencies will eventually replace fiat money.
However, since there is no previous case study of a decentralized global currency, all these remain to be just predictions.