What the Future holds for Cryptocurrencies

The crypto market has had a disastrous first half of 2022. Bitcoin and ethereum have dropped by more than half since their all-time highs in late 2021. While there have been some tiny gains in recent weeks, the cryptocurrency market as a whole remains relatively stagnant. While no one knows for certain, some analysts believe cryptocurrency values might fall considerably farther before seeing a lasting rebound.

Bitcoin reached many new all-time highs in 2021, followed by significant declines and increased institutional buy-in from major corporations. Ethereum, the second-largest cryptocurrency, too set a new all-time high late last year, but then fell below $900 in June, its lowest level since the beginning of 2021. US government officials and the Biden administration have voiced increased interest in new bitcoin legislation.

Meanwhile, public interest in cryptocurrency remains high.

In many respects, 2021 was a watershed moment in the cryptocurrency world, but the market is still in its infancy and continually developing. That’s a significant reason why every new bitcoin high is often followed by a large slump.

It’s not easy to tell where the future will lead, legislation and institutional acceptance of cryptocurrency payments are a big factor to keep an eye on.

Crypto Regulation

Lawmakers in the U.S and throughout the world are debating how to create rules and norms that would make cryptocurrencies safer for investors and less enticing to hackers, so anticipate more discussions on cryptocurrency regulation.

Following the recent Terra Luna catastrophe, US officials have taken a keen interest in stablecoin regulation. In May, crypto markets crashed, causing stablecoins TerraUSD (UST) to depeg from the dollar, and its connected cryptocurrency Luna to drop as well.

As a result, many Terra and Luna investors’ investments vanished within days. Within a few weeks following Terra’s demise, the crypto market plummeted once further, prompting other crypto firms to announce layoffs and freeze withdrawals in order to cut expenses due to the harsh market conditions. Some firms, such as Three Arrows Capital and Celsius, have since declared bankruptcy.

As a result of this, federal regulators now have even more ammo to argue for crypto regulation.

Cryptocurrency regulation is a contentious issue, but many experts believe it is beneficial to investors and the sector.

More regulation might lead to greater stability in the famously turbulent cryptocurrency sector. It also has the ability to safeguard long-term investors, deter fraudulent conduct inside the crypto ecosystem, and give clear advice to allow enterprises to develop in the crypto economy if the correct balance is struck.

In already unpredictable markets, regulatory news can have an impact on cryptocurrency prices. Because of market volatility, experts advise restricting cryptocurrency investments to less than 5% of your whole portfolio and never investing anything you are not willing to lose.

Broader Cryptocurrency Adoption

In 2021, mainstream corporations from a variety of industries expressed interest in — and in some cases, invested in — cryptocurrencies and blockchain. AMC announced that it will accept Bitcoin payments in 2021, while PayPal and Square are also banking on cryptocurrency by enabling consumers to buy it on their platforms. Tesla takes Dogecoin payments and continues to waver on accepting bitcoin payments, despite the fact that the corporation has billions of dollars in crypto assets. Experts believe that this buy-in will increase.

Indeed, Amazon recently generated speculations that it is making strides in this direction by publishing a job listing for a digital currency and blockchain product lead. Amazon’s introduction of cryptocurrency may set off a chain reaction throughout the sector.

While most people don’t see the benefit of paying with crypto just yet, more merchants accepting payments may change the scene in the future. We’re probably still a long way from it being a wise financial choice to spend bitcoin on products or services, but more institutional acceptance might lead to additional use-cases for common people, influencing crypto pricing. Nothing is sure, but if you buy cryptocurrencies as a long-term store of value, the more “real world” applications it has, the higher the likelihood that demand and value will rise.

Future of DeFi

If you’re into cryptocurrency, you’ve undoubtedly heard the word “DeFi.” It is an abbreviation for “decentralized finance,” and it refers to a virtual world of alternative financial services enabled by cryptocurrencies and blockchain technology.

DeFi replaces conventional middlemen such as banks and lenders with “smart contracts.” Essentially, the businesses with whom we contact on a daily basis to handle our accounts are being supplanted by software. As a result, there is no centralized authority to report to in the DeFi space.

However, DeFi is still in its infancy, much like the early days of the internet, which had a “Wild West” atmosphere with primitive chat rooms, rudimentary websites, and early online service providers. With that in mind, experts predict that there will be some bumps and bruises along the road, but in time, there may be an Amazon or Google of the DeFi industry. The next critical stage for DeFi is refining.

If you want complete control over your assets as an investor, DeFi is the place to go.

However, this comes at a cost: there are fewer regulatory safeguards to keep your funds secure. In many respects, DeFi is the “wild west” of banking and investment, where if you lose your money to hackers or other methods, there may be no way to retrieve them.

Because DeFi is still in its early stages, it’s prudent to assess the dangers against the possible rewards when comparing conventional financial solutions to DeFi goods. Because the DeFi area is unregulated, you will incur greater risks with your money, but you will also have more flexibility and power. To begin, you’ll need to purchase cryptocurrency and have a basic understanding of cryptocurrency.

Experts, and the writer of this article, both advise keeping no more than 5% of your whole portfolio in crypto, and only after you’ve built up an emergency fund and paid off any high-interest debt.

Closing Thoughts

We can theorize about the value of cryptocurrencies for investors in the future months and years, but the truth is that it is still a new and speculative investment with no history on which to build forecasts. Nobody knows for sure, no matter what an expert believes or says. That is why it is critical to only invest what you are willing to lose and to stick to more traditional assets for long-term wealth creation.

Keep your investments minimal, and never prioritize crypto investments over other financial goals like as retirement savings and debt repayment.