It is still a hazard to assert anything about the future of cryptocurrency despite a market capitalization of over $200 billion and a user base of over 30 million worldwide. The only problem is, does the vast majority of users understand and appreciate the risks of this investment, or are they just in it to make a quick buck and then cut and run? Despite claims of ‘transparency’ in the blockchain technology that drives cryptocurrency, it is a concern for all serious investors. That is because the basic data mining infrastructure of cryptocurrencies including Bitcoin, the biggest and most valuable among them, is dependent on data miners based in China. Thankfully, today you can buy and sell cryptocurrency at a crypto ATM, which is a positive development although a very small one.
Can cryptocurrency fulfill its potential?
The survival of cryptocurrency depends on how well it can fulfill its potential of providing an alternative to the existing currency units across the world. To that extent, it has already disrupted the currency markets everywhere but that probably happened way faster than what the markets could handle. The Bitcoin ATM units are a step in the right direction.
Earlier, the Chinese government took drastic action by banning cryptocurrency altogether, which resulted in the infamous crash of Bitcoin and other smaller cryptos. This incident served a reality check to crypto enthusiasts and speculators alike – the value of these currencies depends only on their trading volume and has no institutional support whatsoever.
Any currency without controls will be a disaster
Despite the optimism of cryptocurrency evangelists who swear by the potential of the currency to dominate global business, central banks do not see it as anything other than a renegade tool. Market speculation can drive up value as we have seen already but it can also crash down the value on a free fall.
The other major disadvantage of a currency not attached to any asset with a specific value is that it will remain extremely volatile. Its valuation will depend on the whims and fancies of speculative investors. Finally, what will happen in the event of a server crash? This is why Bitcoin ATMs are seen as a more secure and efficient way to trade in cryptocurrency.
Integration with global financial systems can save it
Currencies are the lifeblood of the global economy even though the valuation of these currencies is based on an imperfect and manipulative exchange rate mechanism. Hence, the US dollar is not just backed by the power and might of America but also by the world’s biggest gold bullion reserve. The same holds true in varying degrees about most other powerful currencies.
For cryptocurrency to acquire that kind of value addition, it must be backed by governmental and institutional assets, which will mean allowing these bodies to control the currencies. If that were to happen, it would create the biggest paradox of the cryptocurrency phenomenon since it was supposed to be an alternative to the existing monetary exchange system.
The future of cryptocurrency is difficult to predict – it is definitely not favored by governments across the world in its current form because they cannot control it. Its future probably depends on how well it integrates with the existing currency market and facilitates some kind of convergence.