When cryptocurrency started, it was only a dream or virtual concept until the creation of Bitcoin in 2009 by Satoshi Nakamoto that turned the academic concept to reality. Cryptocurrency is a decentralized (have no central bank) digital currency that can be sent from one user to another without the need of an Intermediary. Advanced encryption techniques manage the currency and transactions are recorded in the public blockchain. Individuals that trade cryptocurrency must have cryptographic keys, aka wallets. Bitcoin, the largest cryptocurrency, has since evolved from peer-to-peer electronic cash transfer to being more of a settlement layer than a payment network. However, there's a raging debate over the future of cryptocurrencies and the blockchain technology in general. After the start of Coronavirus disease (COVID-19) pandemic, Bitcoin very closely correlated to Stock Markets like the DOW ( Dow Jones Industrial Average ). Also the BTC cryptocurrency now trading at $9200 USD has been increasingly correlated with the S&P 500, Wall Street's equity index and benchmark for global stock markets. Many people wonder if these alternative currencies will eventually replace conventional currencies such as the dollars and euros, or they're just a passing fad. However, to answer this, one must first understand the concept and aim of cryptocurrencies. Decentralization of cryptocurrency hinders it from any government manipulation or interference. The negative side of it is that there's no central regulatory authority. Local currencies are highly centralized and supervised by the local governments. In case a bank goes bankrupt or closes down, the local currency deposits are always insured against. However, when it comes to cryptocurrency it is a whole different story. Cryptocurrencies have no monetary policy objectives hence lack support mechanisms. The value of cryptocurrency entirely depends on the investor willing to pay for it at a particular time.
There are a few changes that can work to add credibility and trust to those investing in cryptocurrencies. If cryptocurrencies get floated in Nasdaq or any other large stock exchange by market capitalization, it may have a chance to compete fairly or be used as an alternative to conventional currencies. Another option that could work to add credibility to cryptocurrencies transfer is to get a verified exchange-traded fund (ETF). There's no significant difference between getting an ETF and getting listed on Nasdaq just that ETF trades investment funds on stock exchanges. All these options can work as support mechanisms to put more trust in those who want to trade or invest in cryptocurrencies.
Cryptocurrencies have a few limitations that need to be countered in the future to avoid the risk of becoming unpopular. Such limitations include the fact that the digital fortune can be lost or erased by a hacker ransacking a digital vault or computer crash. Also, the fact that without a digital key, clients can easily lose their funds or digital fortunes, as was the case when Quadriga CX Crypto CEO died holding the passwords that could unlock millions in customer coins. That is just one cautionary tale of how lack of support mechanisms and regulations could be costly. Although some of these challenges could be dealt with as technology advances, there's need for a long-lasting solution to make cryptocurrencies more credible.
On a more positive note, Cryptocurrencies in the future may rise to compete and replace flat currencies. This can only happen when the number of merchants that accept payment through cryptocurrency steadily increases over the years. Currently, only a few merchants accept cryptocurrencies, but once they gain widespread acceptance, they'll become widely accepted and a force to reckon with. Hence, it'll attract more investors in the long run. Right now, only the technologically adept merchants are willing to trade in cryptocurrency. However, for that to happen, consumers must first understand how cryptocurrencies work and be sure their transactions are safeguarded.
In the future, various measures should be put in place to preserve user anonymity and prevent other nefarious activities from occurring under the cryptocurrency umbrella. Blockchain technology would be much more successful if it avoids government scrutiny; hence no tough regulatory measures would be placed on digital asset companies. As a result, they'll run much more smoothly and gain more trust from investors. Also, cryptocurrencies ought to provide a more appealing alternative to fiat currencies in the event of a market correction.
Thanks to the fundamental nature of blockchain technology, cryptocurrencies retain their value even in the face of an economic strife when the fiat currencies will be faltering. Thus, attracting the interest of many investors who would turn to cryptocurrency to safeguard their savings. Even in an economic crisis, cryptocurrencies are set to thrive thanks to their untethered nature, moving money across borders won't be an issue.