Cryptocurrencies are digital or virtual currencies that are secured by cryptography and operate in a decentralized system. While in the year 2017 cryptocurrencies were the talk of the town owing to their large potential for investment returns, the year 2018 saw a considerable decline in their overall value. For instance, Bitcoin was at its peak with its trading value of $19,783.06 in 2017 which dropped to $3,400 by the commencement of the year 2019. This has spiked interest in the minds of people regarding the future and sustainability of cryptocurrencies in 2019. Although the trading value of cryptocurrencies has gone down and potential investors have shifted their focus to other ventures there are still chances for cryptocurrencies of making a successful comeback.
Entry of Institutional Investors
In spite of the fact that individual investors have taken a hit due to the declining value of cryptocurrencies, institutions and organizations are jumping on the board for the first time. Institutional investors have the capability of trading in large volumes when compared to individual investors. This suggests that even if there are less number of trading partners operating in this market, cryptocurrencies can sustain themselves. Many developments like blockchain and imposing regulations along with many others can have a significant effect on institutional participation in this sector. For example, if crypto takes refuge of Dow or Nasdaq or any other similar exchange than it will instantly receive an overwhelming reputation followed by an increased value.
Crypto enthusiasts have been eager for approval of virtual currency ETF by the Securities and Exchange Commission (SEC) of the U.S. for the mainstream investors. On the other hand, SEC has been repeatedly delaying or rejecting applications for the same. According to experts and analyst approval of Bitcoin ETF can significant disrupture in the industry as this will lead to the entry of a large number of investors who are eager to take part in transactions with reduced risks of directly buying or storing Bitcoins directly.
Stablecoins are the type of digital currencies that are linked to stable world assets like dollar or euro or even oil in order to keep their prices stable. On the other hand, cryptocurrencies like ETH and BTC are volatile in nature and their value in USD keeps changing time and again. Stablecoins may be hence next big thing in the world of digital currencies owing to its stable and centralized nature and the downfall of the tether i.e current leader in stablecoin sector accompanied by the entry of new stablecoins in the field.
The Bitcoin blockchain and other similar technologies have continued to develop in spite of the preceding value of cryptocurrencies. The Lightning Network is one such development which aids in achieving higher transaction speed in Bitcoin transactions. Currently, this speed is limited to 7 transactions per second. The Lightning Network has been adopted by CoinGate and has achieved growth of 300% with support of more than 4,000 nodes.
After Bitcoin, Ripple is the second largest currency in terms of volume. Investors are skeptical with regards to Ripple as security due to the absence of decentralization. On the contrary, the Governments and MNCs like IBM have accepted that Distributed Ledger Technology (DLT) works as the backbone of blockchain based tokens irrespective of centralized or decentralized systems. Even though debates and arguments over definitions and implications of various cryptocurrencies are going on, DLT’s potential and importance is recognized by everyone. Internal application of DLT without the help of cryptocurrencies can be destructive for the market. If DLT and centralized cryptocurrencies like Ripple, Stellar, EOS go hand in hand then they will be future of the crypto industry. Ripple, in short, can be new bitcoin of the future.
In 2019 only cryptocurrencies that deliver real value to the investors will stay afloat in the market. With sell-off of cryptocurrencies many fake and fraudulent crypto projects were busted. Already 50% i.e., 1000 cryptocurrencies out of 2000% are either dwindling or dead. Henceforth, cryptocurrencies that add value will stay grow and thrive in the market. The ones that stay would farewell in 2019 and do exceptionally well in a couple of next years.
With technological advancements and the number of projects, Cryptocurrency is definitely here to stay. Entry of institutional investors will keep market afloat. The approval of Bitcoin ETF, the emergence of stablecoins and centralized cryptocurrencies like Ripple and Stellar can be a total game changer and attract a hoard of potential investors. Technological progress accompanied by projects like Lightning Network and Blockchain World Wire will assist the industry to flourish and sustain in the near future. Given the highly sensitive nature of the market, it would be quite interesting to see how these various factors influence the industry and what will be the final verdict for the future of cryptocurrencies.
More on this topic: INVESTING IN BITCOIN: NEW INSTITUTIONAL PLATFORM BY FIDELITY