As a class of nascent financial assets, digital currencies have experienced a significant price drop since the end of 2021, partly due to financial crises, the bankruptcy of some companies active in this field, and macroeconomic conditions.
Nevertheless, the new paradigms presented in finance by Web 3 applications and decentralized finance, along with more transparent regulations, could support further growth in cryptocurrency prices in the future.
This article mentions several factors that can contribute to the future growth of digital currencies.
In this article we will cover:
- Cryptocurrency regulations are important
- The emergence and development of decentralized finance
- Bitcoin halving event and other technological developments
The volatile world of digital currencies is one where fortunes are made and lost faster than one might expect.
The digital currency market has fallen significantly from its peak in late 2021.
Some of the reasons for this dramatic price drop vary from one cryptocurrency to another, but they all share a few reasons for the drop.
The cyclical nature of the crypto market leads to wide ebbs and flows in value, and the current period can be described as a long crypto winter.
In addition, many investors have lost faith in cryptocurrencies as a valid asset class due to bankruptcies and financial crises in the sector in 2022.
Nevertheless, some analysts and experts believe that digital currencies and blockchain-based networks will change financial systems globally in the next decade or so.
As long as this long-term crypto investment thesis holds, there are a few factors that could turn the current downtrend in cryptocurrency prices into their next uptrend, which we’ll explore below:
Cryptocurrency regulations are important
First, governments should impose stronger regulations on cryptocurrency trading. Of course, this may be a tough issue for many crypto advocates, who think that rules stifle innovation and stifle the free market.
Laws give more power to the government and less control to ordinary citizens. So they think that more regulation must be bad for the cryptocurrency market, which is built on the ideals of individual freedom, less government interference, and more financial innovation.
But on the other hand, some experts in the cryptocurrency industry believe that everything is different in this regard and digital currencies desperately need some responsibilities and structures.
When it comes to cryptocurrencies, we’re still in the wild west of an industry, with little oversight and plenty of shady characters.
Crypto investors have learned hard lessons through repeated events including the FTX bankruptcy, the Terra Classic project disaster, and Kim Kardashian’s cryptocurrency verification crackdown that resulted in thousands losing their capital.
If the crypto industry wants to attract institutional investors with heavy capital, it needs to work in a legal and regulatory framework that is more capital-friendly.
Proper regulation allows institutional investors and others to place their funds in this sector with confidence.
The emergence and development of decentralized finance
The real growth in the crypto industry will happen when we see increased interest in decentralized finance (DeFi) and Web 3 applications.
Here, when we talk about a new paradigm in finance, we mean a model that is decentralized, untrustworthy, transparent and accessible to everyone.
Layers of intermediaries such as banks, insurance agents and payment processors are about to be replaced by automated cryptographic systems.
A system where money transfers will be faster, fees will be reduced. As a result, it can be said that the financial system in general will soon become much more efficient. Who doesn’t like the idea of decentralized finance?
With the emergence of DeFi platforms and applications, we are witnessing the emergence of a new type of financial ecosystem that is funded by people, not banks, and with further development in this area, we can expect to see serious innovation and growth in the cryptocurrency market.
Bitcoin halving event and other technological developments
Last, but certainly not least, we have the unstoppable trend of technological advancement ahead of us.
One of the biggest events was the update of the Ethereum platform. Next up is the fourth Bitcoin halving, scheduled for spring 2024.
In this automated event, the number of bitcoins miners receive as their reward for validating network transactions is halved, which severely reduces the supply of new BTC coins.
In the past, this has led to an increase in the price of cryptocurrencies in the months before and after the halving.
Take, for example, the 2016 halving. After that, the price of Bitcoin increased by about 360% and grew from $650 to nearly $3,000 in less than a year.
Similarly, the 2020 halving was before a price jump of about 520% from $9,000 to $56,000 in one year.
There is no guarantee that the next halving will increase the price of Bitcoin this much, but the price chart of this cryptocurrency should take a similar shape in 2024.
History does not repeat itself, but it often shapes the future.
If we want to not neglect other technological developments in other digital currencies. We can talk about faster transactions, increased security and more use cases.
Marge Ethereum was only a stepping stone for further developments of this digital currency. Solana is also consolidating its network structure. Shiba Ino is introducing the Shibarium network, which increases the speed of transactions of this digital currency and its scalability, and several other projects that are always trying to develop their network and project.
Better technology and innovation will simply help cryptocurrencies build better DeFi and Web 3 systems, it will also lead to more demand for cryptocurrencies, which will ultimately lead to higher prices.
Disclaimer: Investing in cryptocurrencies and other ICOs is highly risky and speculative. This article is not intended as a recommendation by the html69 or the author as a signal to buy or sell cryptocurrencies. Because each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions.