Challenges stimulate progress. Technology, like life itself, cannot be static. Only dynamics stimulate positive changes. Amid the cryptocurrency market collapse in mid-May, many retail and institutional investors began to lose faith in the bright future of cryptocurrencies in general and Bitcoin (BTC) in particular. Corporations and institutions, whales, and early adopters converged on a single impulse: the internet was overwhelmed by a wave of mistrust of “number one cryptocurrency” as the best defensive asset, superior to gold and everything else ever invented. before.
One needs to see the whole picture here to realize what is happening. The last time the market suffered more or less comparable and significant losses was a year ago, in March 2020. This year, panic selling caused by a series of negative events: Elon Musk’s Twitter crusade against BTC, the Alleged legal judgment against Binance and the latest crackdown on cryptocurrencies by the Chinese government: They recall the tremendous collapse of digital assets at the peak of many asset rates in December 2017 and the “crypto winter” that followed.
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However, many people who have little understanding of how the cryptocurrency market works do not realize the depth of the changes that the space has gone through in recent years. Emotions are an investor or trader’s worst enemy in a rapidly growing digital asset ecosystem. It is worth looking at the facts dispassionately and analyzing the changes to understand the true value of the ecosystems that grow on the fertile soil of the blockchain.
The wind of change
The investment mindset has changed in recent years. Although still dominated by a highly speculative component, there is also a practical application for settlement. Investors went from short-term speculation to long-term gambling. The number of Bitcoin ATMs you have duplicate since 2020. This dramatic increase clearly demonstrates a growing demand for the world’s largest crypto assets. From a niche, the cryptocurrency industry has evolved in a multibillion dollar industry.
Stablecoins, tokens tied to their corresponding fiat asset, such as the US dollar, the euro, etc., have gained significant weight in 2020-2021. With the emergence of new platforms known as decentralized finance protocols or DeFi, opportunities appeared to offer risk-free returns on the main asset, for example. These platforms are nothing more than distributed programs that provide clearing, custody and settlement services. Each year they take a larger slice of the pie than traditional financial institutions. The increase in activity in the environment of decentralized trading platforms also occurred because they do not have the same common vulnerabilities as centralized trading platforms in their infrastructure.
Decentralized exchanges outperform centralized exchanges in terms of trading volume, proving a thousand times increase in trading volumes only in the last year. Any programmer anywhere in the world can create interfaces to interact with DeFi, and the essence of this interaction is the development of a financial ecosystem that runs on the global blockchain. By now, DeFi’s market capitalization has reached more than $ 100 billion, and this trend will undoubtedly continue soon.
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Speaking of examples, we can outline that even large companies like Deutsche Telekom have abandoned private blockchains and are studying public infrastructure, supporting nodes in networks like Ethereum, Solana, Algorand, Celo, etc. This fact suggests that the world of decentralized finance is gaining ground in the global market for clearing, custody and settlement services, just as Bitcoin had previously secured the status of a protective asset, removing gold from its throne.
We observe that business demand accelerated when real rates on dollar deposits turned negative (central bank rate minus inflation). Inflationary expectations have intensified over the past year, fueling demand for long-term capital preservation. Today, Bitcoin is successfully winning the hearts and minds of not only speculators and hedge funds who, realizing the inevitability of the devaluation of dollar balances, vote with their money and transfer part of the liquidity of the treasury to digital assets.
Related: Bitcoin Price Forecast Using Quantitative Models, Part 2
There are still challenges
Meanwhile, the divergence in regulatory focus continues. Some jurisdictions have created bills, but they have no practical application. At the same time, other countries are just at the beginning of the road to creating regulations, with some banning the use of cryptocurrencies banally, the recent example of China is a good example.
In the United States, for example, banks were allowed to provide cryptocurrency asset custody services. The emerging markets of countries such as China, Russia and India stand out, running from fire to fire, remaining uncertain and trying to propagandize at the state level, offering potential investors so-called “tech candy.” Unfortunately, in practice, all projects that go global are often moved to other jurisdictions, which is very sad.
Related: Stablecoins Present New Dilemmas for Regulators as Mass Adoption Looms
The future of the cryptocurrency sector is undoubtedly optimistic. Any period of “cleaning” and dumping the price burdens, correction and decline, should be seen as another round of evolution. In the near future, we should expect investors to divert their attention from the meticulous monitoring of the market, the hype regarding the coins (which is of no value to the community) and the expectation of new price records to the construction of products in developing areas. The cryptocurrency sphere awaits the emergence of more convenient, reliable and accessible interfaces for major investors interacting with the digital asset market, as well as generation 3.0 blockchains, for which fierce competition will break out in the coming years.
This article does not contain investment advice or recommendations. Every trade and investment move involves risk, and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Gregory klumov is a stablecoin expert whose ideas and opinions regularly appear in numerous international publications. He is the founder and CEO of Stasis, a technology provider that issues the most widely used euro-backed stablecoins with a high standard of transparency in the digital asset industry.