The Future of Cryptocurrency: Trends to Watch
Today, there are countless cryptocurrencies that have been introduced in the financial market after Bitcoin appeared in 2009. The market of crypto reached almost $3 trillion during the 2021 year and has been steadily growing during the past decade. But 2022 presented a severe crypto winter that erased more than $2 trillion in market capitalization.
In the next steps what trends can be expected in the development of cryptocurrencies? Below are some of the trends that could be witnessed in the near future.
Mainstream Adoption
Maybe one of the most significant trends is whether cryptocurrencies are able to become more mass popular. To this day, crypto is not widely accepted by retail buyers as a payment method or a regular type of investment. However, this factor may not remain a problem if the market becomes more stable and less uncertain in the future.
To the mainstream, some of the factors that will lead to acceptance are; the ease of use through companies such as PayPal and Square, more integration into other products such as finance and technology, and better legal frameworks from governments. If there is a mainstream adoption of crypto, market activity and valuations will skyrocket.
Institutional Investment
In addition to the high level of retail adoption, other significant trends that will emerge include the more flow of institutional money from banks, hedge funds, companies among others. Today, many large companies, including MicroStrategy, Tesla, Grayscale, and Mastercard, invest in cryptocurrencies. However, it is still a fledgling compared to the percentage of investments in stocks, bonds, real estate, and everything else.
If investors gain faith in the crypto market through less fluctuation and more regulation, major institutions could significantly increase investment. This would inject a lot of value into the crypto space and affect value scores.
DeFi Expansion
Blockchain based decentralized finance, or DeFi, challenges the traditional financial market instruments. From simple loans to complex structures such as derivatives, DeFi is set to be a genuinely decentralized, censorship-resistant financial system.
In the last couple of months, DeFi has started gaining adoption; however, the sector is still relatively small with around $250bn at its disposal, which is equivalent to just a small part of the overall global financial market. Nonetheless, developers keep on constructing intensely on frameworks like Ethereum, Solana, and Terra. Increased use and development of DeFi apps could perhaps greatly shake the traditional finance sector.
Metaverse Integration
Crypto is strongly associated with innovative trends such as the metaverse, NFTs, GameFi, and web3. Some of the significant projects in these areas are cryptocurrencies and blockchain, in their core uses. For instance, metaverse worlds such as Decentraland have their own system of tokens named MANA.
If the metaverse achieves user adoption in the coming years, linked tokens and blockchain platforms could experience tremendous growth in usage and demand. The expansion of metaverse crypto tokens such as MANA and SAND brings new types of investment.
Regulation & Policy Changes
While crypto keeps on growing, governments all over the world are considering how they can deal with the issue of the sector. Such policy direction would foster innovation and at the same time save consumers from exploitation. However, when it comes to factors such as taxes, financial solvency, protection, and effects on the environment, there are concerns.
This means that future debates over the regulation of cryptocurrencies will greatly impact the ecosystem’s development. The ideal scenarios would enable crypto to continue changing while responding to essential questions from the regulators. However, overly burdening policy may hamper progress and drive such activity to other regions more amicable to cryptocurrencies. The actions that major economies like the United States and European Union undertake will be of global importance.
Sustainability Improvements
One of the largest and continually growing concerns surrounding the crypto industry is its sustainability, particularly from PoW mining. Asking questions about sustainability could turn the public opinion towards crypto for the worse.
Most of the networks that are considered leading such as Bitcoin and Ethereum are hence undertaking sustainability enhancements. Ethereum is in the process of moving to a PoS-based ETH 2.0 in order to reduce its consumption by 99%. There are also other types of cryptos that are environmentally conscious such as the Solarcoin which is powered by solar energy.
Sustainability will need to be the focus of these additional advancements and renewable energy incorporation in the future of cryptos. Look for green areas such as solar-crypto mining farms and carbon credit rewarded blockchains to possibly fuel expansion.
New Subsector Growth
Aside from the leading cryptocurrencies, more fascinating subindustries have continued to develop in various categories such as decentralized social applications, DAOs, governance tokens, real estate-backed tokens, microfinance, supply chain tracking, among others.
In the case of altcoin investing for speculators and early adopters, investing into potentially disruptive crypto subsectors might generate high returns. As more specialised crypto applications emerge and become adopted, and penetrate into other sectors, the demand and action will increase.
Of course, the risks are present due to the nature of crypto and the fact that there are many projects still in their development phase. However, for specific and targeted portions of the portfolios, these assets carry asymmetric risk and reward.
Conclusion
As this brief overview demonstrates, cryptocurrencies and blockchain technology are still far from the level where they could be considered truly pervasive and global. The next years will act as critical years for the evolving crypto economy in terms of regulation, underlying technology, integration of financial instruments, and changing attitude of the investors.
Although crypto faced its trials and tribulations in 2022 due to the unfavorable macro environment, the fundamentals remain strong. To the traditional finance system, web3 of decentralization represents a new paradigm of efficiency, openness, accessibility, and user control.
Some people still doubt whether cryptocurrencies are going to remain with us in the long run or are going to be just another fad. However, with so much pace, funds, and some of the brightest minds across the globe working on the infrastructure of the crypto space, the chances look rather promising for the further growth of cryptocurrencies, dApps, and other products based on the blockchain.