Is Cryptocurrency the Future of Money? Let’s Find Out

Banks also don’t want to be left behind. The 5th largest retail bank in the United States, U.S. Bank, announced last year that it would provide a bitcoin custody service.

See? While the current price action has wiped out optimism in the crypto community and provided big threats to the sustainability of the companies in the blockchain industry, the adoptions behind the scene are still very real. Many institutions, merchants, and even two countries have officially adopted or accepted crypto.

A lot of people, especially the skeptics, seem to think the other way around. They often look at lagging indicators and see that trading volume everywhere has dried up. They assume crypto will not make a comeback this time.

It’s important to keep in mind that trading volume and activities (which translate to these lagging indicators) always follow market trends. When the market goes back to a bullish trend, we will see higher trading activities and adoptions. Once again, the adoption follows the price action and not the other way around.

And as usual, when there are more demands from traders and investors, more institutions and even countries will start adopting crypto as a form of payment or legal tender. That is the power of the domino effect from crypto bullish trending move.

So, if you believe the future of crypto in the next 5 years is bright and will eventually return to a bull market, you might as well say the future of crypto adoption is also bright because it always follows the price action.

Here comes the more important question, though. How can we convince ourselves the current bear market will come to an end? There’s this important factor that we have to talk about when it comes to the cryptocurrency future. That factor is called “fundamental value.”

As everybody knows, 2022 has been a bad year for both crypto and stock. In the stock market, people often talk of “fundamental value” as the core of their analysis. Fundamental values include cash flow, debt-to-equity ratio, business model, and the company’s competitive advantage compared to its competitors.

In the crypto market, however, the fundamental values might look very different. There are many big crypto projects that don’t have any consistent cash flow and their only revenue source comes from selling their own tokens on the exchanges. Because of this, many skeptics often claim that crypto’s fundamental value is assumed to be zero.

Nonetheless, if you look further, you will realize that crypto has one very strong fundamental value. I am talking about “belief .” Yes, many crypto investors believe that cryptocurrency will eventually become the future of money. They believe in the promises, and they have been HODL-ing and buying for a very long time. These long-term holders also own over 90% of supply in profit.

The amount of these long-term investors is huge and they might become the main catalyst for us to eventually return to the bull market. When enough investors and traders believe one asset’s price will go up, they would buy that asset and cause big buying pressure on the open market. This action would cause a self-fulfilling prophecy (asset price goes up because everybody has the same long-term belief).

Whether crypto investors will repeat this self-fulfilling prophecy after what happened this year is not 100% certain, though. While we had these moments with BTC’s previous halvings (2012, 2016, and 2020), nobody can guarantee the next bull market will happen in 2023 or 2024. 

One thing that we know is that past price action is often a good indicator of what will happen in the future. So, is cryptocurrency the future? Perhaps these long-term believers will be able to make it a reality if they decide to buy again sometime in 2023 or 2024.

While the long-term belief among crypto investors might lead us back to the bull market, we must also consider one huge topic that can shape the future. This topic is called regulation. 

Up to today, governments have not done much to regulate the crypto market. Everything considered, most governments have allowed crypto to be bought and sold around the world without much control.

The market reversal from the 2021 bull market to the 2022 bear market, however, has changed the consumer mindset regarding regulations. Unlike years ago when many crypto investors believed that government oversight would become more of an obstacle, recently, many people seem to be supportive of moderate regulations.

We have heard plenty of crypto scams and even money laundering happening all over the world via crypto, and they only became more common this year. Due to these growing negative activities, the word crypto itself is often seen in a negative light.

GWI survey claimed 46% of cryptocurrency investors support regulation because they believe it’s important to combat criminal activities. For comparison, 26% neither support nor oppose, and only 25% oppose regulation. 

The question has shifted from “whether you support regulation” to a more specific “what kind of regulation do you believe is necessary.” Government regulation might become a necessary thing to have. Regulation can also provide a much larger threat to fraud and money laundering activities. 

The thing is, it’s not easy to find the perfect balance between regulation and individual freedom. Many crypto analysts fear the government’s over-regulation would lead to the death of the industry itself.

Recently, the Council of the European Union agreed to track and block suspicious crypto transfers. Moreover, transfers from and to “unhosted wallets” that exceed 1,000 EUR would need to be verified. This agreement is deemed highly controversial by the crypto community.

Considering that most sophisticated crypto investors always HODL their cryptocurrencies in “unhosted wallets” for security reasons, this controversy might impact legitimate use cases of crypto itself.

It will be a bit ironic if governments around the world pass all these strict regulations and enforce them. The thing is, cryptocurrencies were often seen as a tool to achieve individual freedoms over government oversight. 

Having the privilege to control your own private keys in a decentralized utopia is one of the primary reasons why long-term investors believe in the crypto space in the first place. Now when you have to “inform” a certain centralized entity about your non-custodial wallets, that would take away that sense of individual freedom.

As mentioned above, it would be hard to find the perfect balance between the “right” regulation and freedom. If governments decide to go overboard with their crypto regulations, many blockchain-based projects will lose their appeal in the eyes of their investors and loyal supporters.

In the upcoming bull market, whenever that may be, we might see a much more mature market and better use cases beyond trading speculation. There’s a big opportunity in the bear market for companies and individuals to build something new and useful. The future is still somewhat bright despite all the current challenges and issues plaguing the industry.