The future of cryptocurrencies

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The term ‘cryptocurrency’ refers to a currency that exists as a digital concept, not as a physical object like a note or a coin. The ‘crypto’ part comes from the fact that all of the data related to transactions involving these currencies is stored on secure encrypted ledgers known as ‘blockchains’. In the ten years since the first cryptocurrency was launched, the price of Bitcoin has swung up and down wildly, leading to fortunes being made or lost. So what do the next few years hold for it and its rival currencies like Litecoin, Ethereum and Ripple?

Because a cryptocurrency exists purely in the digital space it is beyond the realm of banks or treasury departments. A consequence of this is that it is easy to create new ones and this has led to a situation where the current number of these currencies is estimated to be around 1,600. This expansion of the crypto sector has generated plenty of excitement, but it is unlikely that all of these currencies will remain viable. It will be the most well-established and known currencies like Bitcoin, Ethereum, Litecoin and Ripple that survive, with the first of these still the most successful right now. Of the 8% of people in the US to have invested in cryptocurrencies, 5.15% chose Bitcoin and a single Bitcoin is presently valued at $8,945. Given the degree to which market confidence affects prices in crypto trading, the number of people investing in it has kept the price of Bitcoin reasonably high.

Last year proved to be a good one for the currency, as it doubled in value. Many crypto analysts are tipping another real spike in the price as one of their forecasts for the year; mainly due to the block reward halving that will happen in May. This pushed the value up on both of the previous occasions it took place, and one executive in the crypto sector thinks it will hit $50,000 before the end of 2020. Others, such as Mike Novogratz from the Galaxy Digital crypto investment firm are forecasting around $12,000. Either way, , most 2020 Bitcoin predictions are for price rises.

The consolidation of some cryptocurrencies through the adoption of blockchains for transactions by banks and governments is also forecast by observers – including Binance founder Changpeng Zhao. He suggests that some will succeed better than others, but that they will drive crypto adoption and prices in the future. However, while cryptocurrency is not going anywhere, 1,600 different coins is unsustainable. Approximately 1,085 have died out in the decade since Bitcoin launched and many more will join them over the next few years. The ones that survive are likely to be backed by money from the financial giants, suggesting that the future of crypto is co-option by the establishment. Stablecoins like Tether that are supported by real-world assets such as precious metals or money to ensure their price remains on an even-keel are also likely to lead to greater crypto use for everyday transactions.

The future of cryptocurrencies could be a move into the mainstream, through Wall Street and City of London backing for some currencies and the adoption of Stablecoins for small transactions by the general public, while many of the existing mass of coins fall by the wayside.

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