Everything You Need to Know About Cryptocurrency
Cryptocurrency is an example of a new height and feat achieved in the world of technology. The complex mechanism can leave your mind numb but there is no denial of the fact that crypto is here to stay and to make a massive change in the world of finance.
Let’s have a look into some of its mind-blowing statistics:-
- The market size for cryptocurrency will reach $1087.7 million by 2026.
- By the end of 2030, blockchain adoption will help banks in saving $27 billion.
Hold on. Are the figures and the tech terms making you go crazy? No worries. Let’s dive deep and get acquainted with this overwhelming yet magnificent world of digital assets.
What is cryptocurrency?
The word crypto means ‘secret’. The activity involves advanced coding(encryption) to verify transactions. These are non-tangible assets that are stored, transmitted and distributed through a decentralized system. Central authorities like banking institutions have no control over it.
The mechanism used in the entire process is called ‘blockchain’.
Suppose a transaction is to be made and you enter the entry into the system. The transaction will be shared with networks of other computers all over the world that solves complicated equations to ensure the validity of the transaction. These transactions are clustered into blocks. Series of transactional blocks are then chained together which is impossible to revert and the transactions get completed.
Bitcoin, Dodge coin, Ethereum, Solana, and Litecoin are examples of some cryptocurrencies which have flooded the market.
Benefits:-
- Exponential Industry Growth
According to the LATokens research team by 2025, the total market capitalization of cryptocurrencies can reach a whopping figure of $5 trillion. The major factor is the craze of people and not missing out on an opportunity to earn some extra money. FOMO has always been the driving force behind uncontrolled desires. The young population with a high-risk appetite can be attributed to the massive growth of cryptocurrencies. Also, the number of coins introduced every day in the market with no government regulation is an important factor that drives its growth.
2. Portfolio diversification- With the rising prices of goods and devaluation of currencies, investing in different sectors can shield you against inflation. Although investing in cryptocurrencies won’t protect your money when the market is correcting itself but will tone down the loss which otherwise would have cost you loads of money.
Demerits:-
- Unpredictable in nature- Although cryptocurrencies have made their entry a long time ago in the market, lack of financial literacy can prove dangerous to market stability. The author of the book The Future of Money, Eswar Prasad said in his interview with CNBC
“ Cryptocurrencies may contribute to monetary and financial instability, especially if they were to spawn an outsized and unregulated economic system that lacks investor protection.”
2. Volatility- Take a look at these numbers
- 2017 saw a rise in the price of bitcoins from $1000 to $19000 before crashing to $3000
- In the year 2020, Bitcoins rose to a new and massive height of $60,000 and came tumbling down to $30,000 in 2021.
- In January 2022, Bitcoin, Ethereum, and every other major cryptocurrency dropped by 10%. The cryptocurrency market cap declined by $205 billion.
Cryptocurrencies are highly volatile. The prices are highly influenced by people’s emotions, supply and demand with zero regulation from central authorities. It can give massive returns, and provide a hedge against inflation but it’s still in its growing years. Unless the investors and governments all over the world show confidence in transacting with cryptocurrencies, the volatility will continue to shock the market.