Digital Currency Concept
Digital currency, also known as cryptocurrency, is any form of currency that exists digitally or virtually and uses encryption to secure financial transactions. These currencies do not have a central issuing or regulatory authority but instead use a decentralized system to record transactions and issue new units. This system allows anyone, anywhere, to send and receive payments without needing to physically exchange funds in the real world. Digital currency payments exist as digital entries in an online database that describes specific transactions.
Explanation of Digital Currency
Cryptocurrency is so named because it uses encryption to verify transactions, aiming to provide security and protection for users. Bitcoin was the first cryptocurrency, established in 2009, and remains the most famous to this day. It is often traded for profit, leading to fluctuations in price.
The Future of Digital Currencies
Recently, digital currencies have experienced significant growth, progressing faster than ever. However, the future remains uncertain. Many people began trading in cryptocurrencies for the first time during the COVID-19 pandemic due to reduced spending opportunities. This shift increased interest in digital currencies, previously understood only within a small community of investors, and has now made them a household name. Analysts estimate that the global cryptocurrency market could triple by 2030, reaching an estimated value of $5 billion. Investors, companies, and brands cannot ignore the rising trend of cryptocurrencies for long, whether they intend to buy in or not.
Bitcoin Price Drop and the Future of Digital Currency
Rising inflation and the global spread of COVID-19, particularly the Omicron variant, have impacted both cryptocurrencies and stock markets. For example, the price of Cardano has dropped below $1, XRP fell below $0.60, and Shiba Inu is now at $0.00019. Contributing factors to the decline in cryptocurrency values include increased inflation, the spread of Omicron, the Russian Central Bank's proposal to ban crypto exchanges, and the UK's tightening of advertising on crypto assets.
Main Types of Digital Currencies
Bitcoin was the first cryptocurrency created, with all others collectively known as "altcoins" (short for alternative coins). While it is challenging to rank the best cryptocurrencies, Bitcoin and some of the larger altcoins are generally considered top choices due to their scalability, privacy, and functionality. Below are some of the major digital currencies and their total market values:
- Bitcoin (CRYPTO: BTC): $826 billion
- Ethereum (CRYPTO: ETH): $390 billion
- Binance Coin (CRYPTO: BNB): $79.5 billion
- Cardano (CRYPTO: ADA): $66.3 billion
- Dogecoin (CRYPTO: DOGE): $63.4 billion
- Tether (CRYPTO: USDT): $58.2 billion
- XRP (CRYPTO: XRP): $51.8 billion
- Polkadot (CRYPTO: DOT): $30.5 billion
- Internet Computer (CRYPTO: ICP): $25.6 billion
- Bitcoin Cash (CRYPTO: BCH): $20.1 billion
Will the Digital Currency Market Recover?
Many experts predict that the decline in cryptocurrencies may continue in the short term. However, there is still room for optimism in the long term. Guido Buehler, CEO of SEBA, a Swiss digital asset bank, suggested the possibility of setting a new record in 2022. He told Forbes: “Our internal valuation models indicate a current price range between $50,000 and $75,000.”
Cryptocurrency Market Predictions for 2022
The future of the cryptocurrency market in 2022 and beyond is uncertain, but by monitoring broader trends, investors can make more informed decisions. Three crucial areas to watch are:
- Regulations in the United States and internationally
- Widespread market adoption of cryptocurrency payments
- Exchange-traded funds (ETFs) based on Bitcoin and other cryptocurrencies
In an ideal 2022 scenario, there is hope for a functional system for investors, consumers, crypto companies, and traditional banks, with government entities establishing a legal framework and tax system. Many retailers may start accepting payments in digital currencies like Bitcoin, which should encourage regulatory agencies and politicians to take action. Blockchain systems are also expected to benefit from broader use.
The digital currency revolution may face delays for several years. However, assuming it finally arrives, the landscape could look entirely different. In the very long term, it seems unlikely that any government or group of countries could fully stop the concept of cryptocurrency, though they may be able to slow its momentum.
References:
- "What is cryptocurrency and how does it work?", kaspersky.com, retrieved 26/1/2022, edited.
- Doug Gorman, "Exploring the paradoxical rise and uncertain future of crypto", gwi.com, retrieved 26/1/2022, edited.
- "Will crypto recover? Bitcoin price crash explained and what experts say about future of cryptocurrency", inews.co.uk, 24/1/2022, retrieved 26/1/2022, edited.
- "Types of Cryptocurrency", fool.com, retrieved 26/1/2022, edited.
- Anders Bylund, "The Future of Cryptocurrency", the Motley Fool, 8/12/2021, retrieved 26/1/2022, edited.
