What is the Future of Crypto?
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.
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.
