The cryptocurrency market has suffered massive losses so far in 2022. The two heavyweights Bitcoin and Ethereum had to give up up to 50 percent of their all-time high, which they reached at the end of 2021.
But even in the past, the crypto market in particular was highly volatile and had to accept some price losses again and again after steep flights of fancy. There is probably no way around the realization that investments in cryptocurrencies are not for risk-averse and conservative investors.
Nevertheless, the topic remains hot and interesting – both for professional investors and for average investors who are enthusiastic about alternative investment opportunities.
The only question is how the market will develop in the future. It is precisely with such market fluctuations, which are always a sign of increased risk that investors have to take, that an absolutely binding forecast of developments is not possible. But you can name arguments, which should be as well-founded as possible, so as not to be discredited as charlatanism.
So what speaks for the future stability and for an upswing of the crypto market.
Seven reasons for the upswing:
1. Attempt at regulation in a Cryptocurrency Regulation
Numerous lawmakers around the world are attempting to regulate the cryptocurrency market in some way. Real regulation is indeed difficult here and the lack of such is what made the market so interesting to begin with. However, in order to get beyond the threshold of incalculable risks in this area, one will not be able to avoid some kind of regulation in the long term.
When many crypto companies found themselves in need of existence due to extreme price losses and had to lay off employees, there was a need for regulatory measures that also offer planning and investment security. The very fact that governments are daring to tackle the topic and thinking about how to act suggests that a basis for the worldwide use of cryptocurrencies is being sought. Many experts believe that regulating the market can bring stability to the industry and investors in a perpetually volatile cycle. Investors with a long-term perspective would get a certain amount of protection for their capital and fraud could be curbed or even prevented.
However, legislators who are serious about this topic know that they must not overdo the regulation. Because cryptocurrencies were created in order not to be restricted by legislation. If this is exaggerated, legislators can take the makeup off their regulations again.
But properly done regulation would give the market a huge boost. It’s the turn of the legislators!
2. States are opening up to cryptocurrencies as a recognized means of payment
States have started to recognize bitcoin as legal tender. The first country in line was Central American El Salvador in September 2021. The law for this was launched three months earlier. It stipulates that every trader who has the technical requirements for this must accept Bitcoin as a means of payment. Taxes can also be paid in Bitcoin.
At the end of April 2022, the Central African Republic followed suit. Bitcoin is also recognized there as a means of payment and even has the status of a national currency. A digital coin was also created for this purpose.
Aside from these two countries that are serious about cryptocurrency, there are a few others that are positive about the idea. Bitcoin or other cryptocurrencies are legal and more or less regulated in Switzerland, Japan, Estonia, the Czech Republic and the Philippines.
The game is on and it is foreseeable that more and more countries will step into the arena. Assumable result: upsurge in cryptocurrencies
3. Global companies are interested in the crypto market
Large, influential and well-funded companies have discovered cryptocurrencies and blockchain for themselves. These include, for example, financial technology (FinTech) companies, such as PayPal or Square, rely on crypto as a means of payment and enable users to shop on their platforms. AMC accepts Bitcoin payments and Tesla accepts Dogecoin and occasionally Bitcoin payments, while also holding billions of dollars in investments in the crypto market.
According to experts, it is a matter of time before more and more companies will start to accept cryptocurrencies. This can even start in the second half of 2022 and would then automatically ensure further inflow and upswing. If a global retailer like Amazon were also involved, an avalanche would be unleashed. Because if more and more traders get into this idea and thus the use of crypto goes from the institutional area to the end consumer, a hurdle will be crossed. Because then digital things would be exchanged for tangible assets.
4. The turning point of digitization has already been heralded
Up until 40 years ago it was unthinkable that the computer would determine our everyday work and private life. Today, communication by e-mail is an international standard – at least if you disregard German authorities, where fax machines are still used. Huge amounts of data are stored on tiny chips and sent around the world within fractions of a second. 70 years ago we went to space for the first time, 60 years ago to the moon and now the focus is on Mars.
These are all things that you could hardly imagine before. The thought that there is a means of payment that can make many transactions easier is certainly not far-fetched and once the baby is born, it will also grow. Many experts assume this notion, because the experience of human history indicates it. And this experience is a potential signpost in the further development of cryptocurrencies.
5. Consumer perceptions are changing
Shopping on the Internet, having goods sent to you and sending them back if the color nuance doesn’t match. The boom in online trading or the simultaneous stock exchange trading for private investors directly via their own accounts are punctuation marks. The fact that a broker is still involved in online stock exchange trading, for example, is not noticeable. You just do it because you can. The prerequisites for ensuring that the whole thing takes place safely and is not abused by people who only want our best, our money, have been and are constantly being optimized.
All the possibilities that consumers want to make it easier to fulfill their dreams have long since reached everyday life. It couldn’t be stopped. For many, the crypto market is still a book with at least seven seals. But if you ask your 12-year-old grandson about it as a 60-year-old, you get the background of the cryptos on the tray. Innovations from a wide variety of areas come at ever shorter intervals.
The time of cryptocurrencies seems to have come.
6. The Age of DeFi – Decentralized Finance or Decentralized Finance
This is also new and trendy and refers to a world of alternative financial services in the global digital network. This includes smart contracts without the usual, traditional banks, lenders and financial intermediaries replaced by complex software. DeFi exists and provides a foundation for cryptocurrencies and blockchain technology. DeFi does not have a central authority to complain to or be responsible for anything.
The same applies here: The fact that DeFi was created, has a name and works points in a direction that also benefits cryptocurrencies – the personal responsibility for one’s own assets. DeFi is the wild west of finance, it is in its infancy and has yet to be fully developed and conquered. And when you’ve gambled away all your money in this virtual world, it’s gone. Apparently that is exactly what is accepted and has found its followers.
7. All of the arguments in favor of it
Let’s be honest: there is much, very much to suggest that the crypto market and cryptocurrencies have firmly established themselves in the financial world of the future. The idea that this will simply disappear from the screen again, as the German stock market segment “Neuer Markt” did at the turn of the millennium, does not seem realistic, despite all rational concerns. It seems more likely that this virtual playground of finance will continue to develop and find its place. However, not without the legislators making one or two adjustments.
The legislators have their turn, they have the opportunities and opportunities on screen and now it’s up to them to make something tangible out of it. The first countries are there, others are interested, people are enthusiastic and even large, global companies have understood that something is opening up here that has a future.
A conclusion
Cryptocurrencies and the crypto market are an integral part of the financial activities of many investors. They currently offer great opportunities on the basis of considerable risks in a highly volatile market. But that’s the way finances play. If you don’t put everything on one card when investing in the crypto sector, act as carefully as possible and are aware that the money invested evaporates just as easily as it increases, you can achieve a lot and contribute to cryptocurrencies becoming an integral part our real-virtual financial world.
The chances are there again.