The cryptocurrency market has taken a big hit recently. Can it survive? Last year was the year of cryptocurrencies. This year is shaping up to be the year of regulatory reckoning. While Bitcoin, still the biggest player in town by far, remains more than seven times higher than its 13-month low hit earlier this month, smaller and newer digital tokens have seen their values slashed by as much as 95 percent. There are so many elements at play and the market volatility is the main one.
What is causing this volatility?
Regulatory uncertainty and a general slowdown in the cryptocurrency market, of course. But there are also other key factors at play.
For one, Bitcoin has been struggling to find a new use case since its original value proposition as a way to buy and sell illegal goods and services on the dark web became largely obsolete. The biggest development since, its futures trading availability, was hardly enough to spark a new bull run.
The other problem is that Bitcoin’s success has inspired more than 1,600 rival cryptocurrencies (so-called altcoins) such as litecoin and monero — many of them with advanced technological features that have been used to legitimize them.
Are these problems enough to push Bitcoin into a downward spiral from which it won’t recover? Or will altcoins still riding on Bitcoin’s coattails be dragged down too?
Bitcoin has had a good run, going from less than $US1 in 2011 all the way up to over $US60, 000 in 2021. But the cryptocurrency’s success has also exposed its underlying flaws. One of them is that it takes around half an hour for a Bitcoin transaction to be completed, on average. This does not sit well with companies used to running real-time transactions across borders at the drop of a hat.
Altcoins, with faster block times and lower fees, have emerged as a popular alternative for this very reason. Bitcoin’s share of the total cryptocurrency market cap has dropped. In fact, altcoin trading now accounts for nearly 60 percent of Bitcoin’s own trading volume.
One thing’s for sure: digital currencies are likely to lose their allure unless they can show themselves to be faster, safer, and more affordable than the traditional banking system. Many investors, according to the Bitcoin Loophole review are hoping that this will drive increased institutional participation in the market, but it is hardly clear when (or whether) these players will get involved at scale.
New blockchain technologies, such as Stellar and Ripple, have demonstrated the potential of reducing transaction times to just a few seconds — even though they lack Bitcoin’s coveted status as the largest and most well-known cryptocurrency.
And it goes without saying that many improvements can be made to cryptocurrencies’ underlying technology in order to eliminate their security vulnerabilities once and for all.
It is clear that the future of cryptocurrencies lies in their ability to provide a more efficient and secure alternative to traditional banking systems. How this will play out, however, is still very much up in the air. Only time will tell which digital tokens will come out on top.
As you may be aware, the crypto market is quite volatile and can be hard to predict. However, looking at all indicators, there is a future for cryptocurrencies in 2021, and beyond. It is important to remember that this industry is still in its early stages, and there will be more volatility before it matures. The key for investors is to do their own research, stay up to date on news, and make informed decisions. We hope this article has been helpful!