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IS IT CRYPTO’S TIME TO SHINE?

CRYPTO’S TIME TO SHINE

April 26, 2021 | 

638 Views | 

JOHN K MWANIKI | 

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Even as governments focus on mobilizing their populations against the covid19 pandemic, many cannot help but shift their minds to how the world will look like post the pandemic. Right now, more businesses are rushing to adapt to the new norm of social distancing, eCommerce, and digital transactions. Generally, the pandemic has accelerated the already existing trend towards digital commerce. This major shift also sees the adoption of digital currencies and blockchain infrastructure to provide security of financial transactions and privacy protection. 

Although the cryptocurrency market is highly volatile, cryptocurrencies like bitcoin and Etherium have really withstood the shake. With so many cryptocurrencies in the market, investor interest in virtual currencies has risen significantly in recent months. Many new developments such as the growing popularity of stable coins, increase institutional interest, and pending ETF approval suggests a positive trend in cryptocurrencies.

Stable coins are leading the way

Stable coins refer to digital tokens pegged to a fiat currency that serves as a hedging mechanism against a possible decline of the underlying virtual currency collateral prices. Stable coins appear to be the hope for investors in the market in 2021. The reason why stable coins may see dramatic growth moving forward is the long-term instability of noncentralized tokens. Another reason is that the current leading coin in terms of stable coins, Tether, will possibly be dethroned. Tether (USDT) is one of the initial stable coins to reach the mainstream, and many other stable coins have already entered the market aiming to dominate.

Institutional investors are getting on board

Institutional investors are encouragingly getting into the market for the first time. They allow for significantly higher trading volumes compared to individual investors. That means, even if there are fewer trading partners trading in the market, the industry is sustainable.

Several changes expected to take place this year could positively impact institutional participation in the cryptocurrency market. For instance, crypto could get a boost in value and reputation if it is floated on the Nasdaq or any other similar exchange.

The elusive bitcoin ETF

For several years now, crypto enthusiasts have waited for a digital currency ETF available for mainstream investors in the United States. What happens is, the Securities and Exchange Commission always rejects or delays bitcoin ETF applications stating that they will be decided upon at a future date. 

According to some analysts, if a bitcoin EFT is approved, it could result in a dramatic jolt in the cryptocurrency world- that it could expose the market to investors willing to participate without suffering some of the risks associated with trading tokens directly.

Reasons why it is time for cryptos to thrive

Adoption of blockchain infrastructure in different levels

Blockchain infrastructure is publicly recognized in China, and various nations are embracing Central bank digital currencies. 

In the bigger part of the 20th century, encryption was highly reserved for national security systems and needs. It was not widespread, and many people and institutions using encryption were perceived as having something to hide. However, with widespread online hacking and illegal infiltrations of data, encryption continues to become more critical. 

When eCommerce came to be, internet entrepreneurs started advocating for encryption technologies to ensure systems customer credit numbers, passwords, and other sensitive data entered online. That brings digital currencies into play. Cryptocurrencies utilize the unique blockchain technology that is highly encrypted to ensure anonymity and user protection.

Promises of global clarity on regulation

Global regulators have promised regulatory clarity on cryptocurrencies. The world economic forum builds an association for cryptocurrency governance framework, the SEC has a firm approach on ICOs, and the FCA provides CFTC clarity on guidance and settlement. India has overturned the ban on crypto institutions, while Germany has enacted a law to facilitate crypto service licenses for banks. Across the board, the governments realize that crypto networks are global and cannot be banned because of their architecture that prevents regulatory capture.

Decentralized finance

There is a developing sense of unfairness and demand for transparency. Stimulus benefits the rich in the end, and bailouts continue to reward irresponsible corporate behavior, for example, stock buybacks. Decentralized finance allows everyone to access and reinvent traditional financial instruments like tokenized gold, permission-free loans, and interest-earning accounts. Blockchain boosts the efficiency of previously unthought-of business models by removing the central points of failure and intermediaries. 

The move to remote working

Blockchain technology operates via distributed digital patterns suitable for a post covid world with less face-to-face contact. For instance, the FAANG technology is already exploitative and treats people as products collecting their data. On the other hand, blockchain infrastructure utilizes encrypted personal data repositories only shared in designated cases.

The need for capital preservation 

A trend of debt defaults could lead to bank runs or bail-ins, such as the case of Cyprus in 2012. As such, savings are at high risk, but cryptocurrencies are unseizable and independent. With treasury yields reaching zero, risk parity strategies are no longer working. Pensions also need new ways of delivering their promises. Although gold protects capital at the moment, bitcoin is promising a better future. It has zero storage costs, is transacted over the internet, has a complete supply schedule, and is easily assayable.

What we know for sure

What we know for sure is that cryptocurrencies are not going away any time soon. Although it is difficult to specify, cryptocurrencies are expected to witness dramatic price gains in 2021. Blockchain technology which many digital currencies utilize is spreading well outside of the cryptocurrency industry and is expected to see many applications in the future. In the meantime, regulators and governments continue to struggle with how best to facilitate and control digital tokens.

CONCLUSION

Cryptocurrencies still have many upsides to go, and the scene is pretty much set for them to shine.

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