Cryptocurrency is the youngest asset on the financial market. Until recently, the blockchain technology and cryptocurrency held a strong position as leaders among the most promising areas of investment, which is confirmed by financial injections into digital assets in the amount of tens of millions of dollars. However, the current situation has changed somewhat.
This article will review the stages of development of the digital money industry, as well as analyze the prospects for investing in cryptocurrency today.
What is crypto
Cryptocurrency is digital money that can be used as a full-fledged means of payment, that is, to pay for goods or services, as well as exchange for national currencies or Fiat money. The main principle underlying the development of cryptocurrencies is decentralization, that is, the absence of an Issuer and management.
Currently, there are a huge number of cryptocurrencies, more than 2000, but not all of them deserve attention. Among the most popular of them with significant amounts of capitalization, the first and most famous today is bitcoin.
Whether investing in cryptocurrency serious? Or is this purely speculation?
Cryptocurrencies can be a serious investment, but there are significant differences between investing in digital money or in the real economy. They are as follows:
- The existence of cryptocurrencies in the virtual space causes the absence of their paper form;
- There is no insurance provided for exchanges for trading cryptocurrencies by the state, which increases the risk of investment loss in the event of an exchange closure or account hacking;
- The principle of decentralization of cryptocurrencies provides for the absence of regulation by any Supervisory authority. Accordingly, unauthorized transactions with virtual currencies cannot be tracked;
- The difficulty of applying technical analysis when predicting cryptocurrency prices, due to the short history of virtual currency volatility or immaturity of the market; 5.
Investing in cryptocurrency involves betting on the registry distribution technology that is used to create it. However, the analysis of digital money is radically different from the analysis of assets placed in the real sector of the economy.
Fascinated by the blockchain
The technology of distributed ledger, or blockchain, attracted the attention of investors at the time of bitcoin’s popularization. After the advent of Ethereum, which is a platform for decentralized applications, the use of smart contracts became widespread.
Virtual currencies became an investment tool for everyone who had at least some financial assets. The main difference between cryptocurrencies and other financial instruments is a low entry threshold, anonymity of transactions and multiple growth. The relative availability of investments and significant growth rates have led to the purchase of cryptocurrencies by newcomers who are not familiar with exchange trading at unreasonably high prices. Such decisions were fueled by continuous reports of the unstoppable growth of bitcoin.
Disappointment in the technology
A few years ago, the dynamics of the cryptocurrency exchange rate, as well as the volume of investments in digital money, were actively discussed in the media, which was due to expectations of global changes in the financial world.
However, at the end of 2017, there was a question about the real value of cryptocurrencies and blockchain technology. During the analysis, it was revealed that the main value of the cryptocurrency is the possibility of cross-border transfers of funds with minimal commissions and the ghostly prospects for the introduction of smart contracts.
In 2017, the Ethereum platform was at the initial stage of creation and did not represent any value. All of the above has led to the fact that the cryptocurrency has been assigned the status of a speculative instrument, the use of which is complicated by the lack of a developed regulatory system.
Many young companies have developed fraudulent schemes aimed at attracting investment in certain cryptocurrencies.the principle of operation of such startups is similar to a financial pyramid. The result was a drop in the investment attractiveness of digital money, as well as the emergence of suspicions about the lack of a future for blockchain technology when it is legalized.
However, there is no doubt that companies that successfully develop and implement blockchain technologies in order to increase the speed of transactions and minimize Commission charges for conducting them will receive economic benefits.
Who else believes in blockchain
Governments of many countries are making
efforts to develop a system for regulating crypto exchanges, and new
cryptocurrency projects, along with the “old-timers” of the industry,
are going to conquer a new, legal market for virtual money. This competition is
very similar to the space race, where programs are characterized by long-term
economic benefits, but when they become important for business, the leaders
will be significantly ahead of the rest in development.
This leads to the development of blockchain projects by the largest companies operating in various sectors of the economy. For example:
* Visa has formed a patent application for the creation of a cryptocurrency, which will be controlled by a Central computer•
* WFSC has invested more than five million dollars in the startup Elliptic, which is developing a system for interaction between banks and crypto exchanges. The company advises more than 200 exchanges on financial legislation and identifies users.
Analyzing the development of companies such as Elliptic, which are gradually implementing projects to implement blockchain, we can conclude about the development of this technology.
However, not all projects are so successful. A major Facebook project was closed due to the withdrawal of key partners. This decision was made under pressure from government regulators and was a strong blow for investors in the registry distribution technology.
Blockchain and cross-border transfers
The introduction of registry distribution technology in the financial sector will reduce the time spent on transactions, as well as provide increased reliability of cross-border transfers. The international interbank payment system in 2017 expressed concern about blockchain technology, but recalled the possibility of minimizing costs and risks after its implementation.
Later, the GPI platform was developed to enable instant payments, which confirmed the possibility of eliminating the shortcomings of cross-border transfers without implementing blockchain technology.
Improving the system for conducting cross-border payments is aimed at facilitating and reducing the cost of sending money. The international payment system (SWIFT) is trying to reduce the cost of transactions for banks, and its competitors want to introduce blockchain technology to get rid of this link.
SWIFT has analyzed the possibilities of blockchain technology and, if successfully implemented, is ready to offer an alternative solution to maintain its market share. SWIFT was working on a project running Linux, and also entered into open competition with VISA, Mastercard and Ripple, changing the initial vector of movement towards minimizing the cost of transfers for banks.
Problems with the law
Cryptocurrencies are gradually moving into the legal sphere, where legal regulation is carried out. A significant number of promising projects have not moved from the dead point towards the implementation of their plans. Startups faced obstacles in the form of legislation and distrust from investors, which led to the official closure of many large projects.
Why do government regulators strongly discourage the development of blockchain technology? According to many, the reason is their desire to maintain control over citizens by having access to their Bank accounts.
The main argument of state regulators who oppose cryptocurrency is the anonymity of payments, which, in their opinion, makes it possible to Finance terrorist organizations, as well as allows arms and drug dealers to launder money. However, the problem lies in the illegality of actions, and not in the medium of exchange, which can be cash instead of cryptocurrency.
Despite the seemingly tough attitude of regulators towards cryptocurrencies, many of them are in no hurry to introduce a total ban on the blockchain. They are trying to develop a regulatory system to eliminate the possibility of illegal transactions using cryptocurrencies.
Thus, the collapse of the blockchain is unlikely, after some time, the industry will completely switch to the legal field and the relevant Supervisory authorities will regulate it.
So is it worth investing or not?
In any case, investments in virtual money,
similar to investments in the real sector, are accompanied by certain risks.
Most of them are fraught with legal barriers.
The most promising approach is to monitor the current situation and invest in companies operating in the real sector of the economy, but simultaneously developing blockchain projects. This will allow you to receive dividends from the classic business, and the successful implementation of blockchain projects will provide additional profit.
At the moment, companies implementing projects related to 5G are promising. Basically it is a company engaged in the development of special devices as well as Telecom operators.