The last few years have been quite the ride for crypto investors. From hitting all-time highs to hitting 52-week lows, its growth, as well as fall, has been phenomenal. In the pandemic world, where people were flush with cash from the stimulus, they followed the viral trends and invested in cryptocurrency. This resulted in all-time highs with popular currencies like Bitcoin and Ethereum.
It also led to the growth of meme cryptocurrencies such as Dogecoin, which are based on popular memes. Eventually, it all came to a climax in 2022, with a market-wide crypto crash culminating in steep depreciation of the whole market. This raised some questions about the nature of crypto assets, their regulations, and their safety. So, what exactly does the future hold for cryptocurrencies?
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Market Behavior in the last few years
Both 2020 and 2021 were big for cryptocurrencies. The most popular cryptocurrencies like Bitcoin and Ethereum both hit multiple all-time highs. This was often followed by lows which were usually recovered. Institutional investment from major companies started flowing in. Tesla publicly brought more than 1.5$ billion dollars of Bitcoin, resulting in a 20% jump. And Elon Musk, the CEO of Tesla is an avid supporter of another cryptocurrency, Dogecoin on Twitter. Seeing the potential of the crypto assets, even governments started showing interest. In many ways, 2021 was the breakthrough year for cryptocurrencies.
2022 however marked a downturn. Not just for the crypto space, but almost all asset classes such as stocks started falling. Crypto bore the brunt of the fall as they were considered a volatile asset class. Crypto markets lost more than 1$ trillion in 2022 with major currencies like Bitcoin falling up to 50%. The most egregious fall came in Luna coin which lost all of its value and was removed from the markets. However, since then markets have somewhat stabilized.
Crypto Regulation
Despite the fall in valuation, sentiment among retail investors is still positive. Most people still believe in the cryptocurrency project. Since cryptocurrencies were launched as a decentralized asset for the people, the trust in their ability is still strong. However, more and more people are now in favor of regulation.
US officials have in particular shown interest in the regulation of stable coin (cryptocurrencies that are backed by an asset, either real or virtual, to keep its value constant or stable). However, there is still confusion regarding the way to go about the regulations. The people while in favor of regulations want as less government interference as possible. Paradoxically despite the positive sentiments regarding regulations, people have mixed feelings about their impact.
The problem lies in finding the difficult balance between regulations and the fear of losing the fundamental essence of cryptocurrencies. Regulation offers less risk and safety; while crypto has benefited from anonymity and volatility. On the other side of the coin, there is fear that regulations will turn cryptos into regular currencies under the control of governments. Finding the middle ground between the two sides of the same coin is the challenge faced by the government.
Impact of Regulations
Countries around the world have dipped their hands in crypto regulations. They’ve all evoked different responses and had varying impacts.
The US introduced a bipartisan infrastructure bill of 1.2$ trillion dollars that’d make it easier to track crypto activity. These news rules will help crypto investors properly keep track of their transactions. This will result in a significant reduction in the burden of tax filing from crypto. India too introduced legislation in 2022 to tax crypto assets at a flat 30% rate. You can use a crypto tax calculator India to calculate the taxes. Despite these controversial regulations, many experts believe that they’re a good thing for the whole industry.
In South Korea in 2021 brought a bill to bring their cryptocurrencies from 60 to 5. This was done to remove non-serious vendors and ensure easier regulation of the rest of the cryptos. However, this also meant that user choice was stifled. It’d also mean that any new crypto would find it hard to enter the market due to established dominance.
Most importantly, regulation opens up the way for investment from mainstream companies. In the present scenario, very few corporations have actually invested in the crypto space due to its volatility. However, regulations would mean more stability in the market. This would result in businesses across industries investing in cryptocurrency. In fact, many companies have taken interest in the crypto space and blockchain. AMC has started accepting payments in Bitcoin, while fintech like Square and Paypal allow crypto transactions on their platform.
Ben Weiss, the founder, and CEO of coinflip believes that sensible regulation is a win for all parties involved. “It gives people more confidence in crypto, but I think it’s something we have to take our time on and we have to get it right,” says Ben. Indeed, there’s a lot of hope that eventually, these regulations will be more consumer-friendly in the future.
The Future Remains Hopeful
While the future of crypto will undoubtedly be shaped by regulations, other stakeholders can also play a part. From providing education to facilitating trades, third parties can play a crucial role in the crypto space. The crypto scene will most likely be dependent on four factors in the future.
- Development of technology
- Adoption by corporates
- Consumer demand
- Regulatory environment
While the complexity of crypto’s digital aspect might act as a barrier towards the average person. Its widespread adoption by the public has already paved the way to accelerate both technical and regulatory challenges that cryptocurrencies now face.
Part of being successful is the ability to identify potential future game-changing technologies. Looking at the global market, e-commerce and digital payments have the strongest potential for the advancement of cryptocurrencies. Powered by blockchain, digital services are capable of paving the way for widespread adoption in daily life. And the good thing is that most financial institutions are receptive to the idea of crypto. They’re open to exploring the possibilities of blockchain and its related technologies. These changes will ultimately be what drive the crypto market in the next few years.
Crypto has always been volatile. And its users always knew that. It has been, in fact, one of the driving forces behind its explosion in popularity. That is why despite the current downtrend, the overall situation remains positive for most crypto investors. If you want to learn more about the ever-soaring popularity of Bitcoin and its many financial opportunities, then head on over right now with bitcoin code.
