In 2009, some developers introduced an alternative form of transaction known as Bitcoin. This coin was the first cryptocurrency whose principal purpose was to displace traditional currency. Since then, many types of cryptocurrencies have been introduced, with an estimated market cap of about $2.65 trillion.
Interestingly, some groups of investors have made huge profits from blockchain technology since many people worldwide need to gain more knowledge about blockchain technology. Significant companies like overstock started accepting Bitcoin as a payment method when making online purchases in 2014. Moreover, famous companies, such as Pavilion Hotels, Mastercard, Starbucks, Paypal, and Visa, started adopting this method.
However, on a personal level, cryptocurrency can affect our lives just like mobile phones and the internet did over the years. The purpose of phones was to enable people to communicate over a long distance. Blogs like CryptoManiaks aim to share knowledge and provide crypto recommendations through a platform that is accessible.
Later our lives became impacted by both, from music to alarm clocks. In terms of the economy, Bitcoins may affect the economy because they have the potential to develop or kill central banks. Read through this crypto guide as we discuss how Bitcoinand blockchain technology will foster outstanding finance in 2023.
Why Cryptocurrencies Are Gaining Popularity
While transferring regular currency from the USA to Canada, the sender from the USA will pay some fees to the middleman. Then the middleman will look for some details, send the dollars to the receiver and charge a few. In the case of Bitcoins, no such processes and limitations are involved. Mr. A can send digital currency to Mr. B without the aid of an intermediary.
When it comes to the fiat currency system, there will be a failure if there is currency manipulation. The actual value of the money will depreciate, and there will be no return on investment. During the steady rise in inflation, cryptocurrency like Bitcoin is now at an edge over other currencies.
During the covid-19 period, the stability of traditional currency was affected by inflation. After Covid-19, people started adopting blockchain technology for financial transactions. Individuals look for oversized cushions during hyperinflation to protect their purchasing power and wealth.
Crypto investors think a digital currency will soon become a mainstream asset. The digital currency market has increased eight times since 2020. In 2020, the world experienced disruption in economic activities because of the Covid-19 pandemic. This pandemic caused negative consequences on the economy worldwide, with a tremendous fall in the prices of assets. This growing fear creates an enabling environment for Bitcoinacceptance.
The price of Bitcoin increased due to the limited supply of the cryptocurrency. Bitcoin investors like volatility instead of a one-sided market. The crypto market grew in fame with enough volatility.
How Do Countries Respond To Cryptocurrencies?
The response to cryptocurrency by central banks of many countries is lukewarm. Although some countries support using Bitcoins, others do not use them because of the high level of volatility. Also, controlling taxation and capital has become an essential topic for discussion. However, many banks want to develop a system to match blockchain payment speed.
In some countries, the law made Bitcoin-related activities or transactions illegal. Hence, financial organizations like banks do not participate in any crypto transaction. On the other hand, some countries want to complement the financial system with cryptos instead of replacing them.
How Will Cryptocurrency Impact Global Investment?
Because the correlation between the traditional market and Bitcoins is at the lowest level, they are held as assets and seen as tools for diversification. Moreover, it prevents the portfolios from futuristic risks. This security is the main reason for crypto’s rise across numerous exchange products.
However, some financial experts believe that the cryptocurrency crash will hugely impact the market, just like how mortgage-backed security contributed to the world economic crisis in 2008. The overall market capitalization of cryptos is about $2.65 trillion in 2021, with over 13000 cryptocurrency trading globally. In November 2021, Bitcoin had 42.2 percent dominance, and Ethereum came second with 19.6%.
How Will Cryptocurrency Benefit The World’s Economy?
You do not need a third party during cryptocurrency transactions, which aids in improving the processing speed. Since there is no need for a third party, the transaction cost is meager. The low cost of transactions makes it possible to increase transaction volume efficiently.
There is also no need for a physical venue where individuals will come and perform transactions. There is a lower value of fixed costs because wages are not required, and utility bills or rent expenses are. Some traders do not have a minimum deposit requirement.
Additionally, cryptocurrency does not have geographical hindrances. Thus, no agency can monitor transactions. Therefore, this opportunity enables quick and easy transactions for corporate organizations worldwide.
As of November 2021, Bitcoin was trading at over $59,000. Many people will need help to purchase one Bitcoin. Hence they can buy a fraction of BTC. An individual from the USA can start from as low as $50. Cryptocurrencies can act as common currencies between different economies, facilitating more trade.
A peer-to-peer network supports the cryptocurrency blockchain system. Thus, unlike the fiat currency, the transactions are decentralized. Cryptocurrency users believe they should control their money fully instead of the traditional bank. Also, multinational companies usually take loans in domestic and foreign currencies. With the addition of cryptocurrencies, there will be a diversification of exposure. So, Bitcoins will provide access to different loan portfolios.
Moreover, there is secrecy since the sender and receiver’s information are kept in the blockchain. There are many security stages surrounding the report, which improves mining activity.
Entrepreneurs will be able to accept payment in more currencies rather than traditional currency. The distributed ledger technology backs the Bitcoin network and is digitized and automated. Thus, this system eliminates the risk of corruption and fraud; this is the biggest problem facing the fiat currency system. Neither individuals nor companies will fall victim to only theft or scammers.