Factors affecting the growth of Cryptocurrency Economy
Since the last decade, cryptocurrencies have made their own place in people’s lives. The cryptocurrency market is now the center of attention of many people and continues to gain popularity. Many investors have dedicated their energy and resources into the crypto market and some have even managed to make significant profits from it.
But just like any trade market, the crypto market comes with its own risks. Even though the crypto market has come a long way in the last decade, it still has a long way to go. There are still nations in the world which are reluctant to crypto and people who still don’t know what is going on.
These and some similar factors are exactly what affect the growth of the crypto economy. The crypto market is not where it should have been because there are dynamics which dictate the course the currency is going to take.
It all begins with the media. How did the world get to know about Bitcoin’s potential in the first place? Through the media. And the power of media to influence and persuade the public does not need to be explained.
The impact that media has on the market is classically represented by the 2017 ban of the ICO by the Chinese authorities which led to the fall of the Bitcoin from $5000 to $3000. In the short-term forecasts, these factors affect the crypto market massively.
While news warns people of the short-term market convulsions, acute political situations hugely disrupt the cryptocurrency sector.
An example of this has been seen when the market witnessed a huge collapse following South Korea’s announcement of the closure of crypto exchanges. Another example is when China banned mining in the country.
Cryptocurrency operates in the world economy after all. Therefore, the financial instability in the global sphere affects the digital currencies as well. Inflation, devaluation, and the strong volatility are impacting the young and vulnerable cryptocurrency market negatively.
Moreover, the attachment that traditional financial companies have with the centralized construct of the economy makes it more difficult for them to accept something as innovative and free as the decentralized blockchain.
Adoption in Society
Majority of the world’s population is still unaware of what exactly is cryptocurrency. The business industry is striving to implement blockchain technologies to widen the scope of cryptocurrency. However, the lack of understanding and awareness among the consumers is making it difficult for them to adopt something they cannot comprehend. This, in turn, is affecting the pace at which the market is progressing.
The introduction of something new and innovative often reduces the demand for the old product. The cryptocurrency market is no different. Though Bitcoin has had a leading position in the crypto world, its protocol is strictly rigid. Because of this, multiple platforms with changes in the protocol have been introduced. Bitcoin itself has undergone multiple hard forks in the past two years.
Already, many viable alternatives with more scalability than Ethereum, for instance, are available in the market. More continue to appear every single day. This is not only affecting the price of the coins but also creating confusion among the people and therefore hindering the growth of the coins.
In a world as typically digital as the cryptocurrency world, hacker attacks, security breaches, and system breakdowns is a major concern. With cryptocurrency in the trend, the trend of stealing cryptocurrency is also gaining popularity. The cryptocurrency market is distinguished by multiple exchanges, platforms, and wallets. A minor mistake in the coding can prove to be majorly traumatic for users.
In addition to these, more global factors such as legal and regulatory framework across the world, is affecting the growth of the market.