Cryptocurrencies in 5 Years: a “Quite Harbor” or a Payment Tool?
2017 turned out to be very successful for the cryptocurrency market. Many digital currencies increased in price by several times. The bitcoin exchange rate rose from $890 at the beginning to the year to about $20,000, though with a subsequent fall to $8,000. A similar dynamic was observed with a number of altcoins, including Litecoin, Ripple, Ethereum, and others. In 2018, the dynamics of the market turned negative for a number of reasons (a negative attitude towards cryptocurrencies by the leadership of some countries, prohibition of advertising cryptocurrencies and ICOs on Facebook, etc.). Nevertheless, having already appeared, cryptocurrencies aren’t going anywhere. The market will continue to develop.
But what awaits it in, say, 5 years? At the present, several experts agree that cryptocurrencies and the blockchain are in the same stage of development as the Internet was in 1999. There are many opinions concerning the future of the cryptocurrency market. Provided below are opinions expressed by many representatives of the cryptomarket, including those of analysts, developers, and financiers.
Various Countries are Beginning to Issue State Cryptocurrencies
The initiative to issue state cryptocurrencies was expressed earlier by several countries, including Russia, Great Britain, Venezuela, China, Belarus, Israel, and others. Soon, several of these countries may move from words to action and issue a national cryptocurrency or even cryptocurrencies.
These cryptocurrencies will be regulated by the country’s legislature and have a well-defined exchange rate to more common currencies (USD, EUR, etc.). Most likely, the exchange rate will be in relation to its own national currency at 1: 1. This kind of coin will be accepted at any retail outlet, for government services, and at banks.
For the idea to be realized, legislation must be changed by adding a number of laws to regulate the cryptocurrency sphere. ּBy the way, this is necessary not only for national cryptocurrencies.
A Quiet Tax Harbor
Tracking cryptocurrency transactions is usually difficult, and in many cases, it is simply impossible, especially if you use so-called “mixers” or completely anonymous cryptocurrencies. Even today, many private individuals and organizations don’t pay taxes from their activities in cryptocurrency. This is happening not only because many want to reduce their tax burden. The main reason is the lack of legislation for regulating the cryptocurrency market.
What’s more — in many countries cryptocurrencies aren’t written into the law in any way. Even if a person wanted to report on them for tax reasons, it wouldn’t work because there’s nothing regarding this issue in the legislative base on taxation procedures.
As the cryptomarket grows, so does the level of unpaid taxes. Now, many companies are turning to cryptocurrencies as a quite tax harbor. If cryptocurrency means paying fewer taxes, then why wouldn’t someone take advantage of this opportunity? This is exactly what the Apple Corporation is doing now with its fiat income — it holds its billions in Ireland, and pays the minimum amount of taxes in the European Union.
Tokens as the Foundation of the Cryptoeconomy
More and more projects will use not a fiat currency for their basis, but take advantage of tokens instead. This trend has only now begun to appear, but with the passage of time, it will intensify very significantly. Tokenization may cover the whole world or at least a decent part of it.
Liquidity, easy access to trading tools, and the ability to exchange tokens for any other cryptocurrency or fiat are the primary traits of the future economy. Also, tokens and the kinds of activities associated with them will be regulated by legislature.
Most likely, large investors will gain interest in this sphere and take an active role in it.
Significant Growth in the Capitalization of the Cryptocurrency Market
Before the exchange rate of many cryptocurrencies (first and foremost, bitcoin) fell, experts predicted never before seen growth for cryptocurrencies. For example, they considered it possible for the exchange rate of bitcoin to reach up to $100,000 at one point. Now that cryptocurrencies have experienced a sharp decline, the amount of such forecasts has decreased substantially.
But as was mentioned earlier, after cryptocurrencies appear, they’re here to stay. More likely than not, the capitalization of the market will grow gradually. It won’t grow exponentially, but it will grow. The number of daily transactions with cryptocurrencies will also increase.
Of course, this is will all be possible under the conditions of a generally accepted cryptocurrency economy.
Decentralized Exchanges
Right now, practically all cryptocurrency exchanges are centralized and managed by an administration. Users have practically no rights. Nevertheless, the idea of decentralization found at the basis of the blockchain and cryptocurrencies is gradually being realized in the cryptoeconomy. Centralized exchanges can be closed down by the state where they are registered with just one stroke of the pen (an excellent example is China, where the government considers cryptocurrency to almost be an enemy of the national economy). The management of centralized exchanges can withdraw client funds, and such organizations can be hacked (Mt.Gox, for example).
Things are different with decentralized exchanges. “The administration of a decentralized exchange has completely different rights — management representatives cannot take charge of customer funds at their discretion,” assured Vyacheslav Baykalov, Qurrex Exchange, Eastern European Division.
In order for such exchanges to become popular, reliable work tools are needed. For example, this would include such tools as those provided to trading participants on traditional exchanges. Such instruments, first and foremost, allow clients to work quickly, effectively, and use practically any volume of liquidity. If such exchanges were to appear and the cryptocurrency market was legislatively regulated, then institutional clients capable of investing significant financial resources in the cryptoeconomy would begin to appear on the market.
The development aspects of the cryptocurrency market listed above will most likely be realized in the near future. Modern organizations, including both those working with cryptocurrencies and those just planning to start doing so, should begin preparing for changes right now, so that in the future it’s not too late.
