Investing in cryptocurrency is a huge business opportunity. It is worth investing in, but its benefits are directly proportional to the risks. Despite that, crypto is feasibly the most exciting asset of the 21st century. And 2021 is a confirmation of the fact that the crypto economy experiences significant milestones, fueling the record surge of digital assets. In this article, we'll try to figure out what is the future of cryptocurrency.
Table of contents:
- Cryptocurrency market overview
- Is cryptocurrency a good investment?
- Which cryptocurrency is the best to invest in?
- What is the future of crypto?
Cryptocurrency market overview
At the end of the first quarter of 2021, the cryptocurrency market capitalization was approximately USD 1.9 trillion. According to Facts&Factors, the market is anticipated to surpass USD 5.19 trillion by 2026. Also, according to Coinmarketcap, the number of registered coins/tokens reached about 5,000 by May 2021, and their number continues to grow every day.
The cryptocurrency market is an expanding market that continues maturing, and we can see more and more innovations and use cases flowing in the crypto space by day. These use cases also determine the direction crypto steers to in the future and show how much it is worth investing in cryptocurrency. Here are the main areas in which cryptocurrency is already being used or will be used in the future.
- Smart contracts. Smart contracts can act as a replacement for traditional contracts that deal with mortgages, insurance claims, payments, and government bonds. They provide smoother and faster transactions without the need for a broker or intermediary to manage them.
- Decentralized finance. DeFi comprises applications built on top of blockchains, facilitating permissionless financial services and providing a seamless option for running financial activities. DeFi projects broaden the scope of financial systems, shifting the paradigm from 'portable means' of payments to decentralized apps (dApps). dApps offer advanced financial services such as insurance, lending, wealth management, and a whole range of other financial management services.
- Transactional currencies. Transactional currencies must be non-volatile, so stablecoins have been created to support a 1:1 peg to the underlying asset, which is fiat.
- Governance tokens. Governance tokens are tokens that users hold to govern changes in the blockchain ecosystem. They can be used to form entire blockchain-based voting systems. In addition, governance tokens can be characterized as equities of a specific project, and the more tokens you hold, the more share you have.
- Collectibles, gaming, and royalties. Tokens of these types are unique and indivisible, and thereby they have a lot of value: uncommon gaming rewards, rare collectibles, digital identities, and royalties for artists. The use cases will be more diversified, which would bring many exciting applications for NFT (Non-Fungible tokens).
- Interest, fixed return on investment, and retirement accounts. Financial markets are becoming more volatile over time, so people move towards "saving accounts" in cryptocurrency or individual retirement accounts (IRA) built on the blockchain. The saving accounts are tokens locked in the system to provide liquidity for which you get a fixed percentage of return.
Is cryptocurrency a good investment?
Cryptocurrencies are not merely "good" or "bad" as investments. The novelty of cryptocurrencies makes their risks not well understood, leading to a poor understanding of how the value of a cryptocurrency relates to the value of other assets. There is not enough historical data to predict with certainty how cryptocurrencies will fluctuate when the prices of other assets change. This lack of transparency creates an obstacle to building a balanced portfolio that maximizes returns without exceeding the desired level of risk.
However, despite the lack of historical data, many investors, including institutional funds, banks, and company executives, claim that cryptocurrency should be part of the overall portfolio. Back in September 2017, Jamie Dimon, the Chairman & CEO of Wall Street Banking powerhouse JPMorgan, called Bitcoin a fraud. However, less than two years later, the company announced that JPM Coin was launched for commercial use using blockchain technology.
Also, in the first quarter of 2021, we have seen several noteworthy developments in the crypto field that further their legitimizing and increasing potential. For instance, Around 2,300 U.S. businesses currently accept Bitcoin as payment, according to research from Fundera. Visa, PayPal, Venmo announced they have started allowing U.S. consumers to use cryptocurrency for making payments. Robinhood said its cryptocurrency service added 6 million funded accounts in the first two months of 2021 alone, while the total number of customers reached 13 million in May 2020.
Therefore, we cannot ignore the fact that cryptocurrency is gaining more distribution and becoming more valuable in the market. One way or another, in the coming years, this area will continue to develop, which means it is worth investing in.
Which cryptocurrency is best to invest in?
The most frequently asked question that worries many investors, besides the future of cryptocurrency, is which crypto coin/token is worth investing in? We will take a look at a few cryptocurrencies, which in our opinion, are the best for investing in them.
The list of top cryptocurrencies to invest in cannot start with a different cryptocurrency as Bitcoin (BTC) – the world's most popular cryptocurrency. Bitcoin’s popularity is one of its biggest advantages against other digital currencies. As long as BTC holds on course to dominate the crypto market, investors will always benefit from high liquidity levels, even during periods of market uncertainty. Many businesses already accept BTC as payment, which makes this cryptocurrency a smart investment. Besides, the larger banks are beginning to incorporate Bitcoin transactions into their offerings, too. As of May 1, 2021, Bitcoin's market cap was approximately $1.08 trillion, which was about 49% of the total cryptocurrency market capitalization.
Bitcoin first emerged in 2008 when a person or group known as Satoshi Nakamoto released an official document titled "Bitcoin: A Peer-to-Peer Electronic Money System." The concept behind BTC is that there is no need for a third side to verify data or act as a clearinghouse. It made it possible for people worldwide to send and receive funds almost instantly, without the involvement of any third party, such as a bank or payment provider, and without worrying about exchange rates or high wire transfer fees.
BTC is the original cryptocurrency divided into 100 million smaller units (called Satoshi) similar to gold. There are only 21 million bitcoins globally, and the currently mined bitcoins account is almost 90%. Thus unsurprisingly, BTC predictions for 2021 can sometimes be a little demented. In March 2020, Anthony Pompliano, the founder and partner at Morgan Creek Digital, predicted that by December 2021, Bitcoin would be worth USD 100,000. The BTC price began to get crazy in February 2021 and has increased by USD 56,000 per coin, when Tesla bought USD 1.5 billion in BTC and accepted it as payment for its products.
Ethereum (ETH) is a decentralized software platform that provides smart contracts and dApps, and it is also the foundation on which DeFi and NFT markets are built. ETH is the fuel on which these operations run, so it has large reserves of potential use cases. If you want to participate in the ecosystem Ethereum, purchasing ETH could be a good place to start.
ETH launched in 2015, is currently the second-largest digital currency by market cap after BTC. As of May 1, 2021, Ether's market cap was around USD 341 billion. The goal of Ethereum is to create a decentralized suite of financial products that run without any delays, fraud, control, or interference from a third party that anybody can have free access to, regardless of nationality or ethnicity. This aspect allows access to bank accounts, loans, insurance, or a host of other financial products, even in countries without government infrastructure and identification.
In 2021 Ethereum plans to amend its algorithm from proof-of-work to proof-of-stake. This step will allow Ethereum's network to run itself with far less energy and improved transaction speed. Proof-of-stake allows network participants to "stake" their ETH to the network. This process helps protect the network and process ongoing transactions.
Benzinga, a fintech media and data company, has published a report called "Ethereum Predicted to Crush Bitcoin's ROI in 2021." The survey has obtained data from 100 cryptocurrency traders and investors, and many believe ETH will soon be the top crypto asset.
Cardano is a proof-of-stake blockchain platform founded in 2015 by Input Output Hong Kong and its CEO Charles Hoskinson, who was also one of the co-founders of Ethereum. First offered for sale in 2015 September, and as of May 1, 2021, their market cap is in the region of USD 43 billion. There is a maximal supply of 45 billion tokens ADA, and at the time of writing, there was a circulating supply of about 32 billion.
Cardano is designed to ensure that holders can participate in the network and have a say on any proposed software changes. The open-source project also seeks to "redistribute power from unaccountable structures to the margins to individuals" – promoting to create a society that is more secure, transparent, and fair.
The team behind the ADA says that there have already been some compelling use cases, which aim to allow smart contracts and dApps to be developed with modularity. For example, agricultural companies use ADA to track fresh produce. Other products help to store educational credentials securely against unauthorized access, and retailers get a tool to prevent counterfeit goods.
In 2020, Cardano held a Shelley upgrade directed to make its blockchain "50 to 100 times more decentralized" than other large blockchains. Cardano aims to become a global financial operating system by creating decentralized financial products like Ethereum and offering solutions for chain interactions, voter fraud, and legal contract tracking. Prediction for ADA remains bullish, with many analysts expecting it to hit $2 by the end of the year. Some are even talking about a peak of $10 by year's end.
What is the future of cryptocurrency?
So, the future of cryptocurrency looks bright. According to Ripple CEO Brad Garlinghouse, there are three main crypto trends: cross-border payments, NFT, and involvement of central banks in crypto. This market is expected to continue to grow and attract more users to the blockchain ecosystem. In addition to direct investments in cryptocurrency, potentially, there are other ways to profit from blockchain technology such as issuing your own crypto coin/token or creating your crypto exchange. The best way to benefit from crypto trends is to attract investors to your own platforms.
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