As the new year unfolds, the fate of
cryptocurrency market remains a constant battle for investors what lies ahead.
The strong gains and the fall during the past year have raised a lot of
questions how digital currencies will behave in the coming future.
Media Hype
With each
passing day more and more people are interested to learn about cryptocurrencies
and how they work. The mainstream media is eager to write something new about
virtual currency and even some financial advisors share those things as well.
Due to rising demand particularly in Asia, the price of cryptocurrencies have
skyrocketed. However, the recent cryptocurrency crash especially when bitcoin’s
price plunged reiterates how volatile the cryptocurrency market is. <o:p></o:p>
Transactions Risk<o:p></o:p>
Let’s narrow
down the popular cryptocurrency Bitcoin. It is not hard money and only remains
present in the digital world. Its payment system is very complex and the value
remains volatile. The transaction takes place between individuals without a
third party. Bitcoins are usually identified with an anonymous address that
comprises 26-35 alphanumeric characters beginning with either “1” or “3”. This
address, determines the destination of a Bitcoin, or its fraction. Its monetary
system is not guaranteed by government. It’s pure simple and digital money.
Bitcoin can also be mined through high-end computers and once the transaction
is complete, they are rewarded with new Bitcoins. However, people who have had
mined bitcoins lost billions by losing private key. <o:p></o:p>
David Glance
who is a practice director at the University of Western Australia’s Centre for
Software said Bitcoin’s original design, was limited in its way of processing
transactions and putting them on its blockchain. Developers enforced these
restrictions towards security over functionality that was not a problem in
Bitcoin’s early stages as the digital currency was not popular among people. However,
the split group of developers and followers, later on, had diverse views on the
possibilities of lifting the restrictions. Ultimately Bitcoin’s core developers
projected to create more space in the ledger and then explored the ways to
increase the size of the “blocks” or groups of transactions added to the
blockchain.<o:p></o:p>
Blockchain Susceptibility <o:p></o:p>
According to a
new research by digital forensics firm Chainalysis, nearly 4 million bitcoins
could be lost forever, out of the total 16.7 million bitcoins in
circulation. The study was based on a
thorough empirical analysis of the blockchain — the “digital ledger” which
keeps track of all transactions, and which gives the currency its value.
Another study by Fortune has concluded that between 2.78 million and 3.79
million bitcoins — 17 to 23 percent of existing supply — are lost, that amounts
to more than $US30 billion. <o:p></o:p>
There are over
900 different crypto coins available on the market today. Some coins are
present with esoteric names like PonziCoin, MarxCoin, SelfieCoin, and
PutinCoin, with more coins developing all the time. That is why fears about the
cryptocurrency bubble continue to spread. Some experts have even described
cryptocurrencies as “worse than the IT bubble” of the late ’90s. <o:p></o:p>
Laws and Regulations<o:p></o:p>
Many countries
have banned the use of bitcoin and other digital currencies outrightly. They
have shown a negative attitude towards cryptocurrencies as their respective
banks have issued official statements prohibiting bitcoin transactions citing untraceable
nature, lack of payment system and criminal activities like terrorism or the
drug trade as basic reasons. Morocco and
Vietnam have recently outlaw bitcoin transactions. Bangladesh, Bolivia, Ecuador
and Kyrgyzstan had already banned the use of digital currencies. China has also
prohibited Initial Coin Offerings and bitcoin trading and exchange sites. And
many other countries are still deliberating how to regulate cryptocurrencies
such as India where Reserve Bank of India has deliberated about
cryptocurrencies through various statements. In short, lack of regulation is
considered to be the Bitcoin’s biggest disadvantage and severely affects its
acceptance by people. Lack of regulation is a double-edged sword for bitcoin. <o:p></o:p>
Uncertain Future<o:p></o:p>
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