GLOBAL CRYPTOCURRENCY MARKET
- Growing digitisation of economies around the world, a decrease in the use of physical currency, and the ease of cross-border transactions, will aid globalisation at a time when most economies are searching for ways to push recovery. These all are the main drivers of cryptocurrency prices
- One of the biggest developments in the crypto space in 2021 may be Decentralised Financial Services, or DeFi projects have proved how successful smart contracts can be and not just for financial services. They’ll most likely be the next big thing in fintech.
- Given that Ethereum is the platform on which smart contracts are run, the future of ETH appears to be extremely bright. It also serves as a foundation for decentralised applications (dApps). ETH is on an uptrend and has remained above the $900 mark so far in 2021.
- The Central Bank Group, which includes experts from the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank, and the Swiss National Bank, as well as the Bank for International Settlements (BIS), is conducting comprehensive research on CBDCs, examining the benefits and disadvantages of issuing such a currency in their respective countries.
- In 2020, institutional interest in Bitcoin and other digital assets grew, indicating that institutional interest in Bitcoin and other digital assets would grow in 2021.
- In 2020, institutional investors were more likely to venture into and explore digital assets than in previous years, preparing the market for even greater market capitalization growth in coming years.
Cryptocurrency is the advent of a new age of technology-driven economies with the power to challenge conventional corporate strategies, long-standing industry processes and regulatory insights.
Cryptocurrencies have revolutionary potential to give customers access to a digital payment system, wherever, anywhere, where membership is limited only by access to infrastructure, rather than by factors such as possessing a credit history or a bank account.
Cryptocurrencies continue to draw a lot of attention from investors, entrepreneurs, regulators and the general public.
The dramatic fluctuations in their prices have sparked several recent public discussions of cryptocurrencies, fears that the demand for cryptocurrencies is a bubble without any underlying value, and also questions regarding avoidance of regulatory and legal supervision.
Calls for increased supervision or even a complete ban have resulted from these concerns.
WHAT TRENDS CAN BE OBSERVED TODAY?
Nowadays the crypto market is in its formation stage. One can see an increase in the number of areas where blockchain technology is getting involved. The COVID19 and panic that it caused in the markets are also accelerating cryptocurrency adoption.
- Any cryptocurrencies rate is rigidly tied to the situation in the crypto market.
- Bitcoin and Ethereum are the biggest influencers in the cryptocurrency market.
- Investors are paying attention to the crypto projects that are aimed to create platforms for launching decentralized applications (dApps).
- Significant growth of decentralized finance (DeFi) is being seen. DeFi began in 2020 with a total value of locked asset worth $683.35 million, ending the year with the figure well above $14 billion, which represents growth of more than 2,000%.
- Through applications in lending, insurance, mutual funds, decentralised markets, and even derivatives, the DeFi sector has enormous potential to bridge the gap between conventional financial services and the unbanked.
Cryptocurrency trading is the act of speculating on cryptocurrency price movements via a CFD trading account, or buying and selling the underlying coins via an exchange.
Cryptocurrency markets are decentralised, meaning they are not issued or backed by a central authority like a nation. Instead, they’re distributed around a computer network. Cryptocurrencies, on the other hand, can be purchased and sold on exchanges and held in ‘wallets.’
Cryptocurrency Wallets: There are five main types of cryptocurrency wallets, namely desktop wallets, mobile wallets, online wallets, hardware wallets and paper wallets. One do not need a wallet if they are trading cryptocurrencies via a CFD account.
Market Driver: Markets for cryptocurrencies are driven by supply and demand. Due to their decentralised nature, they are immune to many of the economic and political issues that plague conventional currencies.
Margin: Margin is Cryptocurrency trading usually expressed as a percentage of the full position. A trade on bitcoin (BTC), for instance, might require 15% of the total value of the position to be paid for it to be opened. So instead of depositing $5000, one only need to deposit $750.
Investing in Cryptocurrency in 2021: Cryptocurrency is quickly gaining popularity among investors, but that doesn’t necessarily mean it’s the right investment for every individual. It depends on risk tolerance and investing style.
- Purchasing cryptocurrency directly requires using a crypto exchange rather than a conventional stock exchange. To store the coins, one need a digital wallet, which can be a security risk if not careful. Wallets can be hacked, and if a user forgets their password, they will be unable to access their investments.
- Cryptocurrencies can also be incredibly volatile, which adds to their risk. Bitcoin, for example, has lost more than 80% of its value in the past.
- Regardless of how common cryptocurrencies become with investors, they will fail in the long run if merchants do not accept them.
MAJOR COMPANIES ACCEPTING BITCOIN
Tesla: Tesla’s $1.5 billion investment in Bitcoin have all helped to boost Bitcoin’s credibility. Tesla CEO Elon Musk announced this historic investment in Bitcoin in February 2021, accounting for 8% of the company’s $19.4 billion in cash and liquid assets.
Update- As on 13th May, Tesla is no more accepting bitcoins
Microsoft: Microsoft began accepting Bitcoin payments for applications, games, and other Windows content in 2014.
Square: Square recently made a $170 million investment in Bitcoin.
PayPal: Customers in the United States will be able to buy, sell, and keep a small range of cryptocurrencies directly from their PayPal Cash or Cash Plus accounts starting in 2021, according to a statement released by PayPal in October 2020.
Others are, BMW, JP Morgan, Coca-cola, Burger King, Goldman Sachs etc.
TOP 50 CRYPTOCURRENCY RANKED BY MARKET CAP- MAY 2021
|Rank||Name||Market Cap |
|Volume(30d) (In Billions)|
|49||UNUS SED LEO||$3.41||$.14|
TOP 5 CRYPTOCURRENCIES IN MARKET -MAY 2021
Satoshi Nakamoto is the pseudonym for Bitcoin’s original creator. The person’s true identity is still unknown as of 2020. On October 31, 2008, He detailed how a peer-to-peer, online currency could be introduced. They introduced a decentralised ledger of transactions bundled in “blocks” and protected by cryptographic algorithms, dubbed “blockchain” later.
After more than a decade, BTC is still at the top of this volatile market. Even after losing its undisputed supremacy, Bitcoin remains the most valuable cryptocurrency, with a market capitalization ranging between $100 and $200 billion in 2020.
Ethereum is the blockchain network in which decentralized applications are embedded, while ether is the token or currency that enables or drives the use of these applications.
Ethereum was proposed in 2013 by programmer Vitalik Buterin. Ethereum has a total of eight co-founders. Development was crowdfunded in 2014, and the network went live on 30 July 2015, with an initial supply of 72 million coins.
Ethereum uses blockchain technology not only to run a decentralised payment network, but also to store computer code that can be used to power tamper-proof decentralised financial contracts and applications.
Ether is primarily used for two purposes: it is traded as a digital currency on exchanges in the same way that other cryptocurrencies are, and it is used to run applications on the Ethereum network. “People all over the world use ETH to make payments, as a store of value, or as collateral,” according to Ethereum.
Ethereum is another application for a blockchain that supports the Bitcoin network, but it should not be considered a direct competitor to Bitcoin. However, ether’s popularity has forced it to compete with all cryptocurrencies, particularly in the eyes of traders.
Ethereum, the second-largest cryptocurrency after bitcoin. The ethereum price, after beginning the year at under $1,000 per ether token, has smashed through $4,000—climbing alongside bitcoin. An expert panel has predicted ethereum is set to soar to almost $20,000 by 2025, an increase of 400% from its current price due to major upgrades to help ethereum scale and reduce its sky-high costs.
In 2017, Changpeng Zhao, officially launched Binance, and he has been the CEO of the company ever since. Binance completed its initial coin offering (ICO) of 100 million BNB on July 21, 2017.
All BNB tokens were created prior to the ICO, and were sold within 20 days, raising approximately $15 million.
Binance coin is an ethereum-based (ERC-20) token that can be used to trade cryptocurrencies and pay for fees on the Binance exchange. BNB tokens can be used to pay fees on the exchange, with the incentive being that Binance offers a rebate as an incentive for up to five years of membership.
Binance is distinct from other crypto exchanges in that it transacts purely in cryptocurrencies as opposed to exchanges that deal in fiat currencies. According to the company website, its mission is to become the infrastructure services provider for the entire blockchain ecosystem.
BNB went through a significant price increase at the beginning of 2021, which has put it on the map of enterprise investors.
Binance (BNB) has plans to launch its own non-fungible token digital marketplace (NFTs). Binance’s NFT platform, would enable owners of digital collectibles to mint, store, sell, and exchange their NFTs in a decentralised and seamless manner.
In 2013, it was created by Jackson Palmer and Billy Markus to satirize the growth of altcoins by making the doge internet meme into a cryptocurrency. While the creators envisaged it as a fun, light-hearted cryptocurrency that would have greater appeal beyond the core Bitcoin audience, it actually led to some practicality as its large supply and low price facilitated efficient micro-tipping content on social media.
Dogecoin differs from Bitcoin’s proof-of-work protocol in several ways, one of which is by using Scrypt technology. The altcoin has also a block time of 1 minute, and the total supply is uncapped, which means that there is no limit to the number of Dogecoin that can be mined.
In January 2021, Dogecoin went up over 800% in 24 hours, attaining a price of $0.07, as a result of attention from Reddit users, partially encouraged by Elon Musk and the GameStop short squeeze. In February 2021, Dogecoin hit a new high price of $0.08 following Twitter encouragement from Musk.
Tether (USDT) was launched in 2015and operates on the Ethereum platform. It is a stable-value cryptocurrency, that mirrors the price of the U.S. dollar, issued by a Hong Kong-based company Tether.
Because the crypto markets are extremely high volatile, cryptocurrencies can rise or fall by 10-20% in a single day, making them ineffective as a store of value. The USDT, on the other hand, is immune to these swings.
In 2017, price dipped much lower, which challenged the low volatility mark of this stablecoin.
As of September 2020, there are over 14.4 billion USDT tokens in circulation, which are backed by $14.6 billion in assets, according to Tether.
REGULATIONS IN CRYPTOCURRENCY MARKET
Countries that have regulated cryptocurrency:
United Kingdom: All the businesses engaged in crypto-asset related activities in the UK have to register with the UK’s Financial Conduct Authority. Crypto-businesses are allowed to apply for the ‘Authorized Payment Institutions’ license. The UK High Court recently recognised crypto-assets such as Bitcoin as property under UK common law.
Singapore: Under Singapore’s Payment Services Act, 2020, cryptocurrency trading is legal and controlled by the Monetary Authority of Singapore. To run a cryptocurrency exchange, companies must first obtain a licence. Singapore’s Securities and Futures Act, 2001 regulates public offerings and issues of digital coins.
In recent years, a number of Indian cryptocurrency and blockchain companies have relocated to Singapore. CoinDCX, one of India’s biggest cryptocurrency exchanges, has moved its holding company to Singapore. Since then, the startup has raised more than INR 100 crores from international investors.
Canada: The Canadian Securities Administrators (CSA) released a notice in 2018 clarifying that securities laws would extend to crypto-businesses that sell coins or tokens. Another notice, issued in January 2020, explained the circumstances in which securities legislation will extend to platforms that facilitate the trading of crypto-assets.
Indonesia: This is a one-of-a-kind case of a nation that outlawed cryptocurrency before legalising it. Indonesia initially prohibited all payment systems and financial technology companies from processing virtual currency transactions in January 2018.
Other countries which have regulated cryptocurrency instead of banning it include Japan, Philippines, Switzerland, Germany, Australia, Netherlands, Thailand and South Korea
Countries that have proposed to regulate cryptocurrency:
United States of America: Some states in USA have regulated cryptocurrencies while others are considering laws to regulate. New York has proposed a conditional licensing framework to make it easier for start-ups dealing in virtual currencies to operate.
Others are India, Pakistan, South Africa, Brazil etc.
Countries that have banned cryptocurrency:
China: According to a notice issued by various Chinese government agencies jointly, ‘fundraising and trading platforms’ such as crypto-exchanges are prohibited in China. All initial coin offerings in China are also illegal and prohibited.
Others are Bangladesh, Morocco, Vietnam etc.
SURGE OF CRYPTOCURRENCIES AMID COVID-19 OUTBREAK
- A pandemic has quickened the pace of monetary evolution. Covid-19 has been good for Bitcoin and for cryptocurrency generally.
- The pandemic accelerated people’s knowledge of a more digital world. Second, and as a result, the pandemic significantly increased the exposure to financial surveillance as well as financial fraud. Both these trends have been good for Bitcoin.
- Bitcoin is increasingly being embraced as a store of value, not so much as a medium of payment.
- Cryptocurrencies will not only provide benefits in terms of hedge against the pandemic, but they can also be used as a payment and money transfer instrument.
- A lot of money printed internationally, contributing to shortages after the pandemic. The financial markets were very shaky as well.
US CRYPTOCURRENCY MARKET
- The United States is home to most of the crypto endeavors and activities. Because of this, most would consider it normal for this country to have the largest number of Bitcoin holders out of all the countries. it seems that the citizens of the United States are not that much into holding cryptocurrencies as one would expect.
- But considering that it has the largest population in comparison with the rest, its 8% of Bitcoin owners still represent a large number. After US comes China, Romania and Japan.
INDIA CRYPTOCURRENCY MARKET
- The country has the world’s largest IT population and is one of the fastest growing smartphone markets. As a result, e-commerce players and online payments are rapidly expanding. E-commerce companies may increasingly use cryptocurrency as payment gateways.
- Crypto-assets, if properly regulated, can save a significant amount of time and transaction costs, which are currently as high as 4-5 percent for cross-border remittances. In 2015, the country’s remittance market grew to $100 billion. As a result, it is one of the most active cryptocurrency markets.
- In March 2020, the Supreme court ruled against the RBI ban on cryptocurrencies, which gave a great boost to the market.
- During pandemic, several Indians have lost their jobs, prompting them to invest in cryptocurrency in order to supplement their income as traders, technical analysts, or crypto influencers.
- The government made it mandatory for companies to disclose cryptocurrency investments in March 2021. According to experts, this will bring transparency and will pave the way for all Indian companies to include cryptocurrency on their balance sheets.
- Government has plans to ban private cryptocurrencies. Recently, RBI announced that it is ‘’examining the need to create a central digital currency (CBDC) to regulate the market, which could be a positive move for the crypto market.’’
- Steadily, public support for cryptocurrency is growing in the country. It remains to be seen in what form cryptocurrency would be acceptable to Indian legislators and regulators.
FUTURE OF CRYPTO CURRENCY MARKET (2020-2025)
The technology and its potential to challenge existing financial processes have numerous questions and concerns revolving around it. Although much is still to be learned about this evolving technology. Supporters of Bitcoin and other cryptocurrencies claim that these financial platforms are inherently trustless and cryptocurrency is superior to traditional physical currencies because it is not dependent on any government.
The potential prospects in Cryptocurrency is also very much in doubt. Proponents see unlimited power, while opponents see nothing but risk.
Bitcoin might still be at an early stage of its life cycle and its price remains uncertain in the future, however since the development of the fiat currency, it has become the most thrilling and optimistic currency development and has sparked the interest not just of billionaires, but of the general population looking for an alternative to fiat currencies and precious metals.
The fact that Bitcoin is an asset of almost infinite capacity in terms of price growth is accompanied by the fact that several researches forecasted an almost 7% CAGR for the period 2020-2025.
Is the Future in Hands of StableCoin?
A stablecoin is a new type of cryptocurrency that aims to provide market stability by backing itself with a reserve asset.
Stablecoins have gained popularity as they seek to combine the best of both worlds: the instant processing and protection or privacy of cryptocurrency payments, as well as the volatility-free and stable valuations of fiat currencies.
While bitcoin remains the most popular cryptocurrency, it tends to suffer from high volatility in its valuations. Stablecoins may be pegged to a currency, such as the US dollar, or to the price of a commodity, such as gold. The price stability of stablecoins is achieved by collateralization (backing) or algorithmic processes for buying and selling the reference asset or its derivatives.
Two primary reasons for the price stability of fiat currencies are the reserves that back them and the timely market actions by the controlling authorities, like central banks.
Tether, the largest stablecoin by market capitalization, has faced accusations of being unable to provide audits for their reserves while continually printing millions; many have attributed their unverifiable creation of new coins to Bitcoin’s rise in price in 2017.
Visa’s headlines are causing a stir in the crypto industry, highlighting one key trend: the crypto market is increasingly being differentiated, with stablecoins taking the lead.
RISKS INVOLVED IN CRYPTO TRADING
- The Bitcoin blockchain can process only around 3,000 transactions every 10 minutes.
- Bitcoin’s “proof-of-work” consensus algorithm requires specialized computer chips that consume a great deal of energy — 60 terawatt-hours of electricity a year.
- The risks of trading cryptocurrencies are mainly related to its volatility. They are high-risk and speculative.
- Absence of a central platform in peer-to-peer exchanges can make the buyers and sellers exempt from traditional laws.
- Cyber threats like Phishing, Hacked Trading Platforms, Compromised Registration Forms, Third-Part Applications, Malware, Mitigating the impact of cryptocurrency threats are there.
The integration of new technologies into the banking systems may drive the prices of cryptocurrency to new heights. Some countries are already working on the implementation of cryptocurrency as their alternative currency.
Some economists expect a significant shift in crypto as institutional capital joins the market. There’s also the chance that crypto will be listed on the Nasdaq, bolstering blockchain’s reputation and applications as a substitute for traditional currencies.4 Others believe that all crypto requires is a checked exchange traded fund (ETF).
A cryptocurrency that aspires to enter the mainstream financial system will have to meet a variety of requirements. While that probability seems remote, it is undeniable that Bitcoin’s success or failure in coping with the difficulties it faces would have a significant impact on the fortunes of other cryptocurrencies in the years ahead.