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Is the future bright for Cryptocurrency or has the bubble finally burst? Our latest blog uncovers what has happened and what is next.
Cryptocurrency exploded in 2021 as retail investor mania resurfaced once again, surpassing the untenable levels reached in 2017. COVID-19 meant investors had more savings that could be invested into highly speculative cryptos. With a plethora of new cryptocurrencies to choose from, not to mention the emergence of NFTs that brought celebrities to the forefront of the disrupting industry, it led to a booming year. What does the future look like for cryptocurrency?
Cryptocurrency is an advancing technology with growing interest across the world. The best way to illustrate this growth is by comparing 2021 to the last bull run in 2017. For example, the total market capitalisation of the industry peaked at approximately $750 Billion in 2017, whereas in 2021 it soared to $3 Trillion. Meanwhile, Bitcoin and Ethereum remained the most lucrative assets. But it was an emergence of new cryptocurrencies that propelled the industry last year. This was evident in market capitalisation as just 3 of the top 10 cryptocurrencies in 2017 kept their spots in 2021.
The decentralised and unregulated nature of cryptocurrency was showcased to its very best and worst (depending on your stance) in 2021 as we witnessed the rise of meme tokens. In addition, fuelled by Elon Musk and his social-media presence, several animal coins including Dogecoin and Shiba Inu went parabolic and signified investor preference. Similarly, more celebrities began to embrace cryptocurrency, in particular, NFTs, which led to its own mania phase of digital ownership of rare art such as Bored Ape Yacht Club and CryptoPunks.
Firstly, attempting to condense the last section highlights just how much has happened over the last 12 months. The pandemonium of it all, however, has subsequently led to increasing calls to clamp down and regulate the space. The contrasting stances from various countries on cryptocurrencies have stifled innovation and made regulation hazier. For example, China made its intentions clear by banning all crypto involvement, most notably shutting down Bitcoin miners. India originally decided to ban the entire space, before making a U-turn and choosing to regulate instead.
Secondly, in terms of the SEC and Gary Gensler in the US, the priority is to distinguish between what is a Security, and if so, what are the necessary steps in dealing with it. The best way of demonstrating this confusion is through the clear distinction between Bitcoin and the rest of cryptocurrency. Despite this recent mania phase, Bitcoin has continued to be considered as a completely separate entity altogether and is viewed by Gary Gensler as having the characteristics of a property instead of a security. On the other hand, many other cryptocurrencies pass the Howey Test (US Securities Law) which declares themselves as Securities. Above all, this could lead to future regulation that would inevitably change the face of how the majority of cryptocurrencies currently operate today.
To clarify, the benefits of regulation far outweigh the drawbacks, and ultimately provide the transparency needed to generate more innovation in the space. For instance, 82% of surveyed Indians plan to invest in crypto once the government provides regulatory clarity. Consequently, further regulation estimates that by 2030, 3.4 billion additional people will enter the cryptocurrency market. This will undoubtedly unleash a shockwave of innovation and technology to an already exhilarating industry. However, there remains skepticism over certain laws across the world, and cryptocurrency for the large part is more speculative than ever before. Therefore, you should always proceed with caution and keep up to date with everything happening in your jurisdiction.
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