What does the future hold for Bitcoin?
It all began in 2009 with bitcoin, a digital currency, now a digital asset, based on blockchain technology, to be used for peer-to-peer transactions without having to rely on a central bank third party.
Owing to high value volatility, the price peaked at $ 19,783 (around € 16.17) per bitcoin at the end of 2017, early adopters of the digital currency such as experts made millions. It was dubbed a price bubble by commentators, many of whom made a comparison to the 17th century Dutch tulip mania. As a result, amid price uncertainty, buying, trading and selling bitcoins became a trend, new cryptocurrencies became a reality (Lite coin in 2011, Ripple in 2012, Ethereum in 2015) and digital exchange platforms were developed around the world for trading in cryptocurrencies. And this whole ‘unregulated’ world, can you believe it?
The digital cash revolution paved the way for success. Eleven years later, cryptocurrencies have risen exponentially in number and popularity. More than 2000 cryptocurrencies are listed, which speculative investors have increasingly adopted. In addition, corporations and central banks have introduced their own digital currencies and the adoption of the industry is immense, resulting in a radical break from the conventional “money swap” model.
What is behind the success of this?
The increasing popularity of cryptocurrencies is attributed to the limitations of current financial systems; we see a growing interest in new forms of effectively conducting transactions following the financial crisis, while maintaining high standards of transparency and accountability.
A rich history of innovation, disrupting the future of finance and the monetary system, is at the core of cryptocurrencies. The most critical factor is that the cost of crypto-currency financial transactions is considerably smaller than the cost of transactions in the conventional economy.
The emergence of cryptocurrencies is likely to reshape the essence of currency competition, the international monetary system’s framework, and the position of public money provided by the government.
How does the future look?
Success would mainly rely on four conditions: suitable technology, market demand, corporate champions, and a favorable regulatory climate.
Adoption by a wider public and widespread consumer acceptance as a viable type of money is crucial, which will require addressing realistic technological and regulatory obstacles, along with a lack of faith in and awareness of the use of issuing authorities. Compared to traditional currencies, its relative novelty would probably put off most people, even the tech-savvy.
Cryptocurrencies are also considered a highly risky investment type that is not acceptable for all individuals. The ability to cope with problems such as the fact that there is no central authority to ensure that things operate smoothly or to help bitcoin and other cryptocurrencies would rely on its potential success. In the digital payments sector, fluctuations in value and uncertainty are a key obstacle for adoption. The true value of cryptocurrencies is not known by many individuals since they just concentrate on speculative trading, guided by price and uncertainty. Owing to a lack of transparency, which raises the chances of tax evasion and money laundering, some countries do not consider it legal.
A cryptocurrency that aspires to become part of the traditional financial system will have to meet a very formidable criterion: it must protect the user’s privacy without being a platform for tax evasion or money laundering, it must be technically complex in order to prevent fraud and financial attacks. Hacking malware. It is both easy to understand for customers and decentralized, but with sufficient guarantees and consumer security. Quite a challenge here.
In the future, the e-commerce and retail markets are projected to have a large market share in terms of cryptocurrencies, looking at the various sectors. Cross-border transactions are expected to be impacted by the penetration of digital currencies into digital payments, and digital currencies have the potential to become the largest, if not the only, electronic payment vehicle. This will make digital payment services the next major shift in the growth of global e-commerce, fueled by blockchain technology. Blockchain innovations, which are projected to drive the industry for years to come, are also targeted by financial institutions. It is possible that the financial environment will suffer massive disruption.
Can fiat cash ever be replaced by cryptocurrencies in the future?
Despite this, a major unknown factor exists: how are governments going to handle cryptocurrencies? In other words, in the future, will crypto-currencies ever replace fiat money?
Without a war, governments will not sit back and lose control of the money supply. More than 20 countries have currently begun to discuss the notion of central bank currencies (CBDC).
The first step is that, in the eyes of governments and regulators, cryptocurrencies must become legal. This requires policy makers to establish the correct environment to be legal for cryptocurrencies. Governments have started to establish legislation in this respect to provide a legally compliant framework for trading and investing in cryptocurrencies. Therefore, get ready to see the countries that write legislation related to digital currency use, exchange and storage.
Cryptocurrencies can become legal replacements for fiat money when regulatory barriers are overcome; for others, this may suggest the widespread acceptance of stablecoins, with strict regulatory oversight. For others, fiat money may not be the true victim of cryptocurrencies, but credit cards.
Forecasts are complex. Changes are time intensive. There can be good and bad cryptocurrencies. Cryptocurrencies empower individuals to step away from the conventional currency exchange mechanism and place banks’ financial hegemony at risk, becoming their own bank and payment process. The risk of cybercrime or cyber-attacks against the safety and security of investors is one of the disadvantages.
To the degree that it focuses not only on popularity due to speculation and digitization patterns, but on overcoming current obstacles without eroding the fundamental premises of its life, we can anticipate widespread acceptance of cryptocurrencies.