The Future of Cryptocurrency: Bitcoin and Ethereum values have dropped by more than 50% since their all-time highs in late 2021. Despite some slight improvements in recent weeks, the bitcoin market remains largely flat.
Although no one can be certain, some analysts feel that cryptocurrency values may fall far further before making a lasting return. In 2021, many new all-time high prices for bitcoin were attained, which were followed by substantial drops in price and a rise in institutional investment from important companies.
The second-largest cryptocurrency, Ethereum, also hit a fresh high late last year. But in June, it dropped below $900, marking its lowest level since the start of 2021. New bitcoin legislation has garnered significant interest from the Biden administration and US federal officials. People are still interested in Bitcoin, and it has become a big topic in popular culture thanks to everyone from seasoned investors like Elon Musk to your high school Facebook friend. 2021 was a “breakthrough” in many ways, according to Dave Abner, head of global development at the well-known cryptocurrency exchange, Gemini.
The bitcoin industry is getting a lot of attention and focus. However, the sector is very young and continually changing. That helps to explain why any new high for bitcoin is quickly followed by precipitous falls. Long-term forecasting is challenging, but shortly, industry professionals will be watching developments like institutional acceptance of cryptocurrency payments and regulation to attempt to gain a better understanding of the business.
Regulating Cryptocurrencies Expect ongoing discussions on cryptocurrency regulation as lawmakers in Washington, D.C., and throughout the world attempt to develop rules and laws that will make bitcoin safer for investors and less desirable to hackers, Representatives of the U.S. government have stated that stablecoin regulation is very important to them, especially in light of the most recent Terra Luna crash.
As a result of the fall in cryptocurrency markets, which also caused a dip in the related cryptocurrency Luna, the stablecoin TerraUSD (UST) decoupled from the dollar in May. As a consequence, a lot of investors from Terra and Luna saw their money vanish quickly. After Terra’s collapse, the cryptocurrency market fell once more a few weeks later.
Numerous cryptocurrency companies announced layoffs and stopped withdrawals to save costs as a result of the poor market circumstances. Other companies have filed for bankruptcy since then, including Celsius and Three Arrows Capital. The snowball effect has given federal officials more justification to push for crypto legislation. The snowball effect has given federal officials more justification to push for crypto legislation. “After the tragic events that have taken place in the crypto market over the last several weeks, it is apparent that harsh regulation may emerge soon,” says Marcus Sotiriou, a market analyst at the digital asset broker GlobalBlock.
The bankruptcy of Defi lenders might provide a rationale for the strict rules on cryptocurrency that officials have wanted to enact. Even though there is still work to be done, substantial regulatory progress has been made in 2022. President Joe Biden signed an executive order in March directing federal departments to explore “responsible development” of digital assets, including stablecoins. The US Treasury Department has now announced the first framework stemming from President Biden’s executive order on digital assets.
It outlines how the United States should cooperate with foreign countries on digital assets. In 2021, Jerome Powell, the chairman of the Federal Reserve, stated that he had “no intention” of outlawing cryptocurrencies in the United States, while Gary Gensler, the chairman of the Securities and Exchange Commission, has frequently discussed the roles played by both his organisation and the Commodity Futures Trading Commission in regulating the sector.
Gensler has consistently stated that if more stringent restrictions were not put in place, investors would probably suffer. It makes sense that the IRS would also want to make sure that investors understand how to report virtual money on their tax returns.
Powell and Gensler’s comments are consistent with a growing agreement among American politicians and the Biden administration that cryptocurrencies require further regulation. “More broadly, the public would benefit right now from investor protection surrounding these multiple service providers—the exchanges, lending platforms, and broker-dealers,” Gensler stated recently. The SEC is working in each of these areas and talking with industry players to ensure compliance with these three regulations—exchanges, loans, and broker-dealers.
Regulation in the cryptocurrency world faces challenges, as do most things. According to Jeffrey Wang, head of the Americas at the Amber Group, a Canadian-based cryptocurrency finance company, “there are several organisations that may or may not have jurisdiction to monitor anything.” And it varies from state to state. According to Wang, the absence of clear legislation now prevents American businesses and investors from functioning, which represents a “major obstacle for cryptocurrencies.”
Although cryptocurrency regulation is controversial, many experts feel it will benefit both investors and the industry as a whole. Increased regulation might result in more stability in the typically volatile bitcoin market. Furthermore, if the right balance is struck, it may protect long-term investors, reduce fraud in the cryptocurrency ecosystem, and provide clear guidelines to promote corporate innovation in the sector.
Ben Weiss, CEO and founder of CoinFlip, a network of cryptocurrency ATMs and a marketplace for buying cryptocurrencies, asserts that “sensible regulation is a win for everyone.” Since people now appear to have more faith in cryptocurrencies, I believe we should go slowly. In already unpredictable markets, regulatory news may have an impact on cryptocurrency prices. Due to market volatility, experts advise limiting your cryptocurrency investments to no more than 5% of your whole portfolio and never putting money at risk.
In 2021, mainstream businesses from several sectors showed interest in cryptocurrencies and blockchain technology, and in some cases, they even made their own investments. For instance, AMC declared last year that it would take Bitcoin as payment. By enabling customers to purchase on their platforms, fintech businesses like PayPal and Square are also placing a bet on cryptocurrencies. Although the corporation has billions of dollars’ worth of cryptocurrency assets, Tesla accepts Dogecoin payments and is still undecided about accepting bitcoin payments.
Experts anticipate an increase in this buy-in. Some analysts believe that bigger international corporations will push this adoption even more in the second half of this year. Weiss thinks that corporations such as Amazon and large banks will begin to invest in cryptocurrencies. For Amazon, for example, would “give a lot of credibility” and “create a chain reaction of others supporting it.” While most individuals don’t see the benefit of purchasing with cryptocurrencies now, as more merchants begin to accept them, the situation may change.
Although it may take some time before buying products or services with Bitcoin will be a wise financial move, more institutional acceptance may lead to new applications for regular consumers and affect the price of cryptocurrencies.
Nothing is certain, but the longer you hold cryptocurrencies as a long-term store of wealth, the more likely it is that demand and value will rise as they find more “real-world” applications. Non-fungible tokens, or NFTs, have existed since 2014, but it wasn’t until 2021 that this cutting-edge technology became widely accepted.
Famous people and major companies like American Express and Gucci are interested in NFTs, which stand for digital ownership of a range of unreplicable intangible things. Data collected by DappRadar, an app store for decentralised applications, shows that total NFT sales in 2021 were $25 billion, up from $94.9 million the year before. However, the question of whether NFTs are merely a fad or a trend is still up for dispute.
According to statistics from DappRadar, NFT sales declined below $1 billion in June for the first time in the previous 12 months. The opinions of experts are still divided; some call NFTs a trend that is still up for dispute. According to statistics from DappRadar, NFT sales declined below $1 billion in June for the first time in the previous 12 months.
The opinions of experts are still divided; some call NFTs “bubbles,” while others argue that the smart contracts used in blockchain technology, which underlies them, are what provide genuine value. Artists and producers are asserting that this is the newest method of income in the meantime.
According to Humphrey Yang, the personal financial specialist at HumphreyTalks, “I do think that they’re really hot right now, especially the previous four months.” I think they’ll still be there in 10 or 20 years. I’m not sure how often we utilise them. Communities will continue to hold some importance for people, but NFTs’ more extensive uses will be more fascinating.
Recent evidence suggests that the market may finally be slowing down. At the beginning of the year, almost a million accounts were actively buying or selling NFTs. However, as of recently, only roughly 491,000 accounts were doing so. Because of the dropping value of cryptocurrencies and other macroeconomic factors including inflation, increasing interest rates, and Russia’s conflict in Ukraine, several analysts predict that the NFT industry will continue to be negatively impacted.
Throughout the preceding year, many people acquired NFTs, either as investments or simply for fun. Whatever the cause, the recent bitcoin market fall has drastically lowered the value of many of those digital assets. Yang claims that from an investment standpoint, purchasing an NFT is “riskier” than purchasing cryptocurrency since it is “almost like a leveraged gamble on cryptocurrency.”
People don’t understand the difference and buy them because they are entertaining, he said, adding that it is essentially gambling. You should probably avoid NFTs, knowing that they are much riskier and more speculative than crypto, especially as the price of bitcoin is generally declining. According to experts, most long-term investors will be better off investing in bitcoin or Ethereum, two of the biggest cryptocurrencies, instead of an NFT, with a tiny amount of their portfolio (less than 5%, and never at the price of achieving other financial goals).
If you’ve invested in cryptocurrencies, you’ve probably heard of the term “Defi.” It refers to a digital setting where alternative financial services utilise blockchain and cryptocurrency technology. It stands for “decentralised finance.” With “smart contracts,” Defi substitutes traditional middlemen like banks and lenders. In essence, the software takes the place of the businesses that manage our accounts on a regular basis.
As a result, Defi entities are not subject to any centralised authority. Defi, however, is still in its relative infancy, much like the early days of the internet, when there were few websites, few online services, and primitive chat rooms, giving the impression of the “Wild West.” With that in mind, analysts predict that there may be some hiccups along the road to its growth, but eventually, there may be a Google or Amazon of the Defi domain.
According to Dr. Merav Ozair, a professor of fintech at Rutgers Business School and a blockchain expert, further improvement is the next critical step for Defi. The next stage, he argues, is to learn how to write decent code and turn everything up a notch.
According to Dr. Merav Ozair, a professor of fintech at Rutgers Business School and a blockchain expert, the next essential step for Defi is to improve. He claims that the next step is to learn how to write competent code and to crank everything up a notch. However, there may be a cost because there are fewer legal safeguards in place to protect your assets.
In many ways, Defi is similar to the “wild west” of banking and investment, where there may be no way to recoup your money if it is lost to hackers or other means. Because Defi is still in its infancy, it is prudent to weigh the risks and potential rewards when comparing it to other financial solutions. Because the Defi market is unregulated, you may face greater financial risks, but you will also have greater freedom and control.
To get started, you’ll need a basic understanding of cryptography and some bitcoin. According to experts, it’s ideal to only have 5% of your whole portfolio invested in cryptocurrencies, and only after you’ve amassed an emergency fund and paid off any high-interest debt.
Bitcoin is a great predictor of the cryptocurrency market as a whole since it is the most valuable cryptocurrency by market cap and the rest of the market often imitates its trends. After a turbulent year in 2021, the price of bitcoin topped $68,000 in November, setting a new record high. But everything collapsed in 2022.
Amid continued macroeconomic uncertainty brought on by increasing inflation, a weak stock market, rising interest rates, and worries of a recession, Bitcoin and the larger crypto market have been declining this year. Since last November, Bitcoin has lost more than two-thirds of its value and recently fallen as low as $17,500. Experts are divided on whether bitcoin has bottomed out yet. Some claim it has already happened, while others predict a drop to $10,000 for bitcoin in 2022.
Because of this volatility, experts recommend limiting your initial cryptocurrency investments to no more than 5% of your whole portfolio. But how far can bitcoin go in the long run? Despite bitcoin’s rocky start to the year, economists believe it will hit $100,000; the question is when, not if. According to Kiana Danial, author of “Cryptocurrency Investing for Dummies,” Bitcoin’s history may provide some pointers as to what to expect in the future.
The second-largest cryptocurrency and most well-known alternative coin are called Ethereum. It may be used as a reliable indicator of the cryptocurrency market, much like Bitcoin. Its value has increased dramatically over the past six years, rising from $0.311 at its introduction in 2015 to nearly $4,800 at its peak in late 2017. Despite being some distance from its all-time high, the price of Ethereum has the potential to increase significantly throughout the rest of 2022.
Experts believe that the outcome of Ethereum’s substantial upgrade, expected on September 19, may have an impact on that statistic. According to insiders, Ethereum is changing its technology to a less energy-intensive version called “The Merge.” As a result of the improvements, the network will purportedly become faster, more economical, and more effective.
Experts predict that ether might once again break $4,000 in 2022 and may even reach $12,000 if Ethereum keeps its promises with the integration. Investors are keeping a careful eye on every development leading up to the merger and, in some circumstances, profiting from the present market slump by purchasing the dip in front of it.
According to analysts, only time will tell if Ethereum’s price will rise or drop back to earlier lows. This year is going to be crucial for Ethereum; almost a make-or-break year, remarked Henri Arslanian, global head for cryptocurrency at PwC, a professional services company. The volatility of bitcoin and Ethereum is another justification for investors to play a steady long game. Don’t be concerned with short-term volatility if you’re buying with the intention of a long-term gain.
The best courses of action are to “set it and forget it” and stop thinking about your bitcoin investment. Every time there is a price movement, whether it is up or down, experts continue to warn us that emotional reactions can lead investors to act hastily and make choices that cause them to lose money on their investment. The fact is that cryptocurrency is still a new and speculative investment with no historical data on which to base forecasts.
We can speculate on the value of bitcoin for investors in the coming months and years (and many will). No matter what a particular expert believes or claims, nobody truly knows. For long-term wealth creation, it is crucial to only invest what you are willing to lose and to stick with more traditional assets. Keep your investments modest, and never prioritise cryptocurrencies over other financial objectives like retirement savings and debt repayment with high-interest rates.
edited and proofread by nikita sharma