Bitcoin and other cryptocurrencies have obviously become a breakthrough of the century in the financial and business surrounding. However, it is still not clear whether such currencies stay afloat even in a few years time. Among the main obstacles preventing these from converting into a universally and easily usable ones are regulatory frameworks, poor cybersecurity, an extensive energy consumption.
Main Predictions on Future
According to some economists, cryptocurrency is likely to become more patronized by the institutions and thus the investments will increase. This has to do with the more active regulation of the currencies by the governments worldwide and thus the more increasing confidence of investors. Once the regulations are set and implemented, institutional investors will be able to breathe easier and be more certain as to putting money into the cryptocurrency market.
Cryptocurrencies are also not likely to stop being that volatile. Although the regulation in place is aimed at decrease of such a volatility, the intrinsic nature of the cryptocurrency itself will not let it be considerably diminished. Moreover, such a volatility is the main factor of the sudden successes on the markets, making people millionaires in a few seconds. This also implies an absolutely reverse scenario with sudden crashes and financial losses.
The factors causing cryptocurrency volatility include:
- lack of intrinsic value,
- insignificant institutional capital,
- poor regulatory oversight,
- hard mentality of investors.
Even if the cryptocurrency market becomes more regulated, and the volatility of the currencies slightly decreases, the technology beyond it is still too complicated for customers. To ensure the universality of the currencies’ usage, it is to be easily accessible and understandable not only to investors, but also to a greater majority of people. As long as this is not the case and the technology remains so complicated compared to conventional currencies, people will continue to be deterred from using it.
Possible Scenarios for Cryptocurrency
The mentioned above obstacles and challenges faced by the currencies in question bring us to the following idea. If a cryptocurrency aspires to become a part of the common financial system, it shall satisfy widely differing criteria. Firstly, it has to be mathematically complex to avoid any possibility of hacker attacks or fraud. At the same time, it has to be nothing but accessible and understandable technology for people to comprehend and be able to use.
Thirdly, the system is to continue being decentralized, so that consumers enjoy adequate protection and their anonymity is properly preserved. Fourthly, it is still highly desirable for cryptocurrencies to become less volatile to ensure investors’ confidence and the overall market stability. Therefore, there is a slight chance that all of these demands and criteria can be satisfied in the nearest future, and thus the digital currencies are likely to save their status quo.
All in all, however uncertain the world may feel about cryptocurrencies as substitutes of money, the technology of blockchain and even some currencies are likely to stay here. It is hard to predict in what way will these be used and how risky they are to be. This is still a breakthrough in the international financial system and it is not to disappear unnoticed.