In the cryptocurrency world, 2021 has been a tremendous year so far. Regulation talks that might have a substantial impact on the sector and increased institutional support for Bitcoin have all contributed to new all-time high prices for the cryptocurrency. With all of this interest in crypto, this year has seen a massive increase in the number of people aware of it, from long-time investors like Elon Musk to high school students on Twitter. However, with 2023 coming to end, there is a persistent question on what will be the Cryptocurrency Future?
Dave Abner, the head of worldwide development at popular cryptocurrency exchange Gemini, thinks 2023 has been a “breakthrough” year. “Cryptocurrency is getting a lot of attention.”
It is still a young business, though, cryptocurrency will be the future. Even though it is impossible to predict the long-term direction of the crypto-currency industry, analysts are keeping a close eye on trends such as legislation and institutional adoption to understand the sector better.
Even though precise forecasts are impossible, we spoke to five specialists in the crypto industry about what they’re keeping an eye on for the rest of 2023 and upcoming 2024:
Regulation of Cryptocurrency
The debate over cryptocurrency future regulation is certain to continue. Lawmakers worldwide are trying to figure out how to make cryptocurrencies safer for investors and less appealing to thieves by establishing regulations and guidelines for the industry.
According to Jeffrey Wang, president of the Americas at Amber Group, a Canadian crypto finance firm, regulation is “probably the major overhang in the crypto business internationally.” Clear regulations would be greatly appreciated in this situation.
In September, China said that any cryptocurrency transactions within the nation are illegal, thus putting a halt to any crypto-related activities. In the United States, things are less certain. SEC Chairman Gary Gensler has frequently indicated that his agency and the Commodity Futures Trading Commission have a role in policing the cryptocurrency business, despite Jerome Powell stated that his agency has no intention of banning it.
Recent comments from Gensler claim that investors would be “harmed” without more stringent regulations. As a result, the IRS has a strong interest in ensuring that investors are aware of how to report virtual money on their tax returns.
Regulation, like so many other aspects of cryptocurrencies, has many difficulties. It’s possible that several agencies may or may not be able to monitor everything, adds Wang. “And it varies by state.”
Clear regulations would remove a “major obstacle” for cryptocurrency, according to Wang, since US corporations and investors are now operating without clear guidelines.
How will the new regulations affect investors?
The IRS may detect tax avoidance examples involving crypto-assets more easily because of the new proposed legislation. It is still important for cryptocurrency investors to keep a record of their capital gains and losses. New rules in cryptocurrency books may help investors maintain track of their crypto transactions.
CoinTracker.io’s Shehan Chandrasekera, a CPA and head of tax strategy, recently told NextAdvisor that if the bill signs into law, exchanges will have to submit 1099-B tax forms to investors containing cost basis information. “This will reduce crypto tax filing.”
Regulators’ announcements can affect the price of the cryptocurrency in markets that are already volatile. Avoid investing anything you can’t lose due to market volatility and keep cryptocurrency investments to less than 5% of your total portfolio.
In the end, many professionals with blockchain jobs believe that regulation is helpful to the sector. CoinFlip CEO and cofounder Ben Weiss believe that “sensible regulation is a win for everyone” regarding cryptocurrencies. That’s a good thing, but I think we need to take our time and make sure we get it right.”
Approval of a Cryptocurrency Exchange-Traded Fund
The New York Stock Exchange just debuted the first Bitcoin ETF, a huge step forward in this direction. There is a new and more conventional approach to investing in cryptocurrency as a result. With the BITO Bitcoin ETF, you can invest in the bitcoin market directly through the brokerages you already use, such as Fidelity or Vanguard.
People might wish to do what we do in equity and bond markets, Gensler remarked at the Aspen Security Forum last summer.
The BITO ETF, on the other hand, links to Bitcoin, but it doesn’t hold the cryptocurrency itself. Instead, the fund’s holdings are in Bitcoin-related futures contracts. However, experts believe that Bitcoin futures may not directly reflect the price of the underlying cryptocurrency. As of now, investors must wait for a Bitcoin-specific ETF.
BITO is the first ETF to receive SEC approval after several considerations over the past few years.
What a cryptocurrency exchange-traded fund (ETF) means for investors?
No one knows how many people will buy into BITO yet, but the fund saw much activity during its first week. Americans might have a greater impact on the crypto market if more standard investing products included bitcoin assets. You don’t need to learn how to use a bitcoin exchange if you already have a retirement or other traditional investment account with a brokerage.
Investments in crypto ETFs such as BITO are subject to the same level of risk as any other cryptocurrency investment. It’s still a risky and speculative investment. A crypto fund is only a good option if you’re willing to lose the money you’ve invested in crypto on an exchange. Think carefully about whether you’re willing to take on the risk before investing in cryptocurrency.
More Widespread Use of Cryptocurrencies in Institutions
Blockchain and cryptocurrency are becoming increasingly popular with large corporations across various industries in 2021, with some even investing in the technology themselves. AMC, for example, announced recently that it would accept Bitcoin payments by year’s end.
Companies like PayPal and Square allow customers to buy cryptocurrency on their platforms and place bets on the cryptocurrency market. Even though Tesla has billions of dollars in cryptocurrency assets, the company has been debating whether or not to accept Bitcoin payments. Experts expect that this kind of buy-in will grow in popularity in the future.
When it comes to the growth of the industry, “we’ve seen a significant inflow of attention, and that will continue to drive the growth for a long time,” says Abner.
It’s possible that in the latter half of the year, large, multinational firms will accelerate their use of blockchain technology. According to Weiss, institutions such as Amazon or large banks are increasingly becoming interested in cryptocurrency. To “add credibility,” a major store like Amazon may “cause a chain reaction of others approving it.
Reportedly, Amazon is hiring a “digital currency and blockchain product lead.” In addition, Walmart is looking for a blockchain expert to oversee its strategy.
What institutional adoption means for investors?
Using Bitcoin to buy goods or services is unlikely to make financial sense soon. Most consumers don’t see the point in using cryptocurrencies to buy goods and services, and this could change in the future as more retailers begin accepting cryptocurrency payments.
However, more institutional adoption could lead to more use-cases for everyday consumers, impacting cryptocurrency pricing. Buying cryptocurrency as a long-term store of value isn’t certain, but the more “real world” uses it has, the more likely demand and value will rise.
Why is the cryptocurrency market so volatile?
Even while cryptocurrency is still a relatively new business, it gains much traction and creates much disenchantment among potential investors. However, this market is still small in comparison to regular currencies and even gold. A group of people with a huge amount of crypto coins can affect the market, even small. Even if they only sell Bitcoins, it would be enough to bring down the entire market.
In the bitcoin market, there is much speculative trading going on. Investors bet on whether prices will rise or fall to gain money. These speculative bets cause a quick influx or outflow of money, causing significant volatility.
Unlike fiat currencies such as dollars, cryptocurrencies such as bitcoin and ether have no physical backing. That is, supply and demand determine their price. Demand or supply might fluctuate for various reasons if no other stabilizing element is present, such as government support.
Bitcoin is a relatively new concept, having been around for almost a decade. The blockchain or other technologies that power these coins are still emerging. The scalability issue arises when a smart contract is not validated in the timeframe expected, resulting in rapid downward pressure.
Compared to real estate or the stock market, this market does not require any special knowledge. As a result, it is largely part-timers who invest in it. In the beginning, they expect to make a lot of money quickly, but when that doesn’t happen, they generally withdraw. As a result of this frequent involvement and withdrawal, volatility is also a result.
Why Is This Time Bitcoin Price Rally Different?
Several experts believe that the current rise in Bitcoin (November 2020) bears little relation to its infamous rise in December 2017, when the currency smashed all prior records.
It was a disappointment for those who hurried to get in on the legendary Bitcoin surge of 2017, only to see the currency sink soon after. However, many believe that individual investors, rather than institutions, aided the current currency spike. As the people cashed out, Bitcoin’s price fell.
Institutional investors are now promoting and supporting Bitcoin. Like Fidelity Investments, JPMorgan, and PayPal, several large financial institutions have moved into the crypto industry.
Digital assets are available at Fidelity, JPMorgan has launched an internal digital token, and PayPal will begin accepting bitcoin payments next year. Famous Wall Street hedge fund manager Paul Tudor Jones has shown interest in Bitcoin. Like the 1970s gold standard, Jones thinks that Bitcoin will serve as an anchor to prevent currency devaluation.
Large corporations like Square and Galaxy Digital Holdings are stockpiling Bitcoins. They are not only encouraging others to buy it, but they are also buying it themselves. It could be excellent news for Bitcoin investors, as it suggests that they may be less likely to sell during this rally, as institutional investments are typically not purchased to make a quick profit.
Few people seem to be paying notice to Bitcoin’s amazing growth throughout this run. Many people who had never heard of cryptocurrency began to invest in Bitcoin in 2017 because of the currency’s rising value, which generated headlines and conversation. In the end, the price of the product fell significantly due to the frenzy.
People who trust in the future of blockchain technology and its widespread adoption are the only ones who are talking about Bitcoin’s recent rise. Some individuals are afraid of another fall, so there isn’t a frenzy this time. Or because this bull run is the real deal.
It’s safe to say that despite some caution, there’s much optimism about cryptocurrency’s future. Keep in mind that there are some risks.
What are the possible risks?
Concerns about the currency’s volatility are one of the most important ones related to Cryptocurrency. It might fluctuate dramatically over weeks, days, or even hours. Security threats like a 51 percent attack, in which miners acquire control of the network and halt transactions, are also possible.
Because of the recent growth in institutional interest and the expansion of Bitcoin’s global reach through companies like PayPal, the future of cryptocurrency seems brighter.
What are Cryptocurrency future predictions?
Because Bitcoin is the largest cryptocurrency by market cap, it serves as a good indicator for the whole crypto market because the rest of the market follows its lead.
At $68,000 on November 30, 2021, it was the highest price ever recorded for the virtual currency Bitcoin. Last April and October, the market reached record highs of over $60,000; this current record high comes just months after the market hit a summer low of around $30,000 in July. Cryptocurrency investments should comprise no more than 5% of your whole portfolio due to their high degree of volatility.
It’s not clear yet how far Bitcoin will go. “Cryptocurrency Investing for Dummies” author Kiana Danial believes Bitcoin’s history may provide clues.
Bitcoin’s price has seen several dramatic rises and falls since 2011, according to Danial. “As for Cryptocurrency, I see short-term volatility and long-term growth.“
Many others are more optimistic about the short-term growth of cryptocurrency. The chief technical expert at cryptocurrency analytics firm TokenMetrics Bill Noble expects bitcoin will rise throughout the year. According to him, it’s more likely that Bitcoin will see a rise to $75,000 in coming years.