Let’s once again take a step away from the daily fuss of currency prices and tech innovations and look at the changing role and place of cryptocurrencies and blockchain technologies in the world around us.
We can confidently say that the outgoing year was no less significant for the cryptosphere than 2017, a year of a huge influx of newcomers into the cryptocurrency world. This time around, we saw the incredible growth of cryptocurrency rates, the emergence of various unique NFT, DeFi, and GameFi projects, the birth of new cryptoassets, the regulator crackdowns, and the first attempts to adopt cryptocurrencies at the state level.
However, despite the rapid growth in the crypto mass adoption levels, the critical mass has not yet been reached. There is a considerable gap between “knowing about cryptocurrencies” and “owning cryptocurrencies”.
According to researchers, there are currently as many (or few?) as 200 million people in the world using cryptocurrencies. Only a few more have prior experience of using or owning them. In terms of adoption, the number of users now is comparable to the number of Internet users in 1998.
So in terms of development and influence on society, cryptocurrencies caught up with the Internet … of 1998. It means that almost everyone knows about them, but only the savviest use them. Most people still prefer old technologies, while at the same time waiting for new ones to come and change their lives. I remember well the exact same anticipation around the Internet in 1998.
That being said, crypto is entering our life much faster than the Internet at that point. So the recent predictions about the DeFi sector growing 100 times over the next five years are likely quite close to the truth.
In this regard, it’s interesting to watch politicians’ attitudes to crypto. After all, they are at times most in tune with new strong trends – and the quickest to adapt.
For example, during a podcast with Peter McCormack, Miami mayor Francis Suarez stated that he considers Bitcoin to be the most peaceful revolution of our time. In his opinion, such a digital asset is capable of “eradicating” communism due to its “incredible power to liberate people” and the potential to democratize their choice.
He considers the ability of BTC to create a system free of “wild inflation and devaluation caused by corrupt players” its most significant advantage. It is therefore not surprising that several countries in Central and South America, as well as Africa, are considering adopting the asset as legal tender, Suarez noted.
In turn, US Congressman Patrick McHenry called on state officials to figure out, understand cryptocurrencies, and capitalize on the opportunities they provide. He wants to see America as a crypto industry leader, not an idle observer who ends up wasting all its potential.
“History knows countless examples of stupid regulation. When the English government opposed automobiles, they introduced a law demanding that a car must have at least three passengers at all times. The idea was that during refueling, one was supposed to sit in the car, the other – to refuel, and the third – to be waving a red flag, – said McHenry. – Congress can’t be so witless as to wave a red flag facing a tech revolution. On the contrary, we should support and understand it. We must become a global leader in the area.”
In the second half of 2021, cryptocurrencies “skyrocketed” largely thanks to inflation in the US and around the world. It has long been noticed: the higher the consumer price index in America, the higher the interest in defensive assets, including crypto. And nowadays – primarily in crypto.
Even skeptical economists, having looked at the price dynamics over a couple of years, admit that cryptocurrency, regardless of its substantial volatility, is the best way to protect one’s purchasing power, including because inflation turns out to be much higher if we take into account assets that are not incorporated in the US consumer price index. It is no coincidence that MicroStrategy CEO Michael Saylor warned in late October that inflation could potentially hit double digits.
Here is one famous bitcoin optimist, Salvadoran President Nayib Bukele, reacting to the latest speech of the US Federal Reserve Chair Jerome Powell: “Can you guys just stop printing more money? You’re just going to make things worse.”
It’s true that many are still worried about the latest Bitcoin crash when it fell below $ 42,000 on some exchanges. Many seasoned traders have expressed concern that there will be another low-level test before the ultimate recovery begins.
Most likely, we were dealing with a “bubble”: due to inflation fears, at a certain point, much more fiat money was poured into the first cryptocurrency than it was really worth.
The International Monetary Fund also saw similar signs. IMF experts Tobias Adrian, Dong He, and Aditya Narain warned of a possible bubble in the digital asset market and called for coordinated, consistent, and comprehensive cryptocurrency regulation.
The regulator noted that the cryptocurrency market capitalization of about $ 2.5 trillion shows the remarkable economic value of blockchain technology. However, experts say that such a high market valuation of crypto assets could also indicate a bubble. As evidence, they used massive sales that followed the omicron coronavirus strain emerging.
At the same time, the financial institution realizes the impossibility of simply prohibiting cryptocurrencies – then users will go offshore. The IMF believes that in order to regulate the crypto industry, you need global rules, not just a ban on digital assets that will push users to decentralized exchanges outside of any regulations. Also, the IMF representative stressed that no state could solve this problem alone since cross-border crypto transactions cannot be controlled.