Did the Global Community Make Progress Toward Acceptance of Cryptocurrencies in 2020, Or Is It Still a Fringe?
It’s been a phenomenal year for some of the largest cryptocurrencies, as Bitcoin skyrocketed to all-time highs and other altcoins reached levels not seen since 2018. The enthusiasm is high among crypto buyers, yet it is important not to forget why digital currencies were initially created — to offer a decentralized, transparent, and fast replacement for fiat currencies. Did the global community make any progress in respect to that during the past year?
Can you use crypto as a cash replacement?
When compared to 2017, there are many more businesses today accepting Bitcoin or other popular cryptos as payments, which is an encouraging sign. In this regard, it is possible to acknowledge that some progress was made, even though several stumbling blocks remain.
First, buying crypto and then sending it involves several costs that at many times exceed the cost charged by regular banks. On top of that, cryptocurrency transactions are not settled instantly and if blockchain delays occur, it can take up to a few hours.
The meaning of rising valuations
Rising cryptocurrency valuations throughout the year suggest an increasing number of people and companies have been buying aggressively. Although not used as a cash replacement, crypto is seen as a protection against the diminishing purchasing power of money. As prices go up, it all acts as a self-reinforcing pattern, generating new buying.
Another important factor to consider is that due to their high volatility, cryptocurrencies continue to be speculative assets and that should be another reason why there’s a massive bull run in play. The same thing happened in 2013 and 2017, and it can happen again in the future.
The world should already be accustomed to large crypto bull markets, followed by sharp contractions. However, the good news is that looking at a multiple-year range, the idea of crypto is catching on. Transitioning to a cashless society will take time, but tokens like Bitcoin can get society accustomed to a completely new concept of money.
Still no regulatory framework
Cryptocurrency regulation is still at a crossroads, given countries have mixed approaches and there is no jurisdiction expected to embrace decentralized crypto as a universal means of payment. The prospects for that occurring are low since governments will likely argue they need control over the monetary system to prevent a large economic contraction during the downward side of a business cycle.
Central banks in China and Sweden are already testing digital currencies and others may follow. That’s good news for the digital revolution in the financial system, but it puts Bitcoin and its peers in a difficult position. The most likely scenario is to have a world where traditional cryptocurrencies are treated as financial assets. However, there is a pessimistic scenario as well, where governments start imposing restrictions on crypto usage, just to facilitate the adoption of their own digital tokens.
The bottom line
In 2020 there had been an increased appetite for cryptocurrencies coming from both the retail and institutional sides. There is a precedent in 2017 for a large number of people buying crypto but last year companies also joined in masses, attracted by high growth prospects of valuations. Steps forward have been made toward acceptance of cryptocurrencies, yet a lot of work is still left to be done. On top of that, government-owned digital currencies could be a “game-changer”, since the idea of digital money will deviate from decentralization.
Do you want to start your cryptocurrency trading journey today? Visit CMarkets Group, open an account, and begin trading a rich selection of cryptocurrencies.
