Cryptocurrency has had an up-and-down year in the last 12 months or so. It saw gains in March as stock markets faltered, and it’s recently been rising again.
If you’re an investor, it’s hard to know what to expect from the crypto market. Only time will tell what it will actually do. Use these predictions about the future of cryptocurrency to guide your investment choices.
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1. Institutions Are Becoming More Interested in Crypto
One big trend in the cryptocurrency market right now is institutional interest. Banks and other financial providers are finally seeing potential and value in cryptocurrencies.
This isn’t surprising, as the financial industry tends to be somewhat traditional. Increased understanding in the advantages of cryptocurrency is one reason for renewed interest. Innovations in blockchain are also improving institutional interest.
What will this mean for the future price of cryptocurrency? It’s likely a good thing. As institutions invest more into cryptocurrency, they’ll give it more legitimacy.
It will also create more demand for various tokens. That, in turn, will increase their price.
2. Regulatory Compliance Builds the Future of Cryptocurrency
One of the changes in the cryptocurrency market has been increasing regulation. This might seem like a negative factor, but it’s actually having a positive impact on crypto prices.
Why?
A better regulatory framework for cryptocurrencies creates both confidence and stability. It helps investors ensure their assets are secure. That, in turn, makes them feel better about investing in crypto.
This is particularly true for big investors and institutions. No bank wants to invest in an asset that’s subject to enormous swings. Increased regulation produces more stability, which can help to even out volatile prices.
It also better protects investors from those unpredictable swings in the market. In turn, it can limit losses.
Increased regulatory compliance also produces transparency. Blockchain technologies are founded on the principle of transparency. The regulations can make operations and transactions even more accessible.
They also reduce fraud, which protects investors.
Increasing regulation has been the trend, and this is likely going to continue. The result will be a better, more secure trading environment.
3. Returns Remain High
Increasing regulation can help to even out stock market swings. Cryptocurrency investors may worry too many rules will wipe out the historic leaps. In short, they might worry that returns will fall.
This seems unlikely. Returns on Bitcoin and other cryptocurrencies have stayed high in the last few years. As noted, regulatory compliance increases confidence, which can drive speculation.
Other factors in the market will likely continue to drive prices higher. This is especially true as demand for cryptocurrencies increases.
4. Blockchain Advancements Increase Adoption
One big factor in higher crypto prices will be the increasing adoption of coins. This trend is already noted, as more retailers are adopting crypto payments. This is especially true in the e-commerce sector, which has seen an enormous boom this year.
Payments aren’t the only thing blockchain technologies can be used for, though. The advent of smart contracts proved blockchains can handle almost any business transaction. They can even be used to create apps.
This capability led to people buying Ethereum and other coins. The Ethereum blockchain was one of the first to introduce smart contracts.
Ethereum recently innovated by introducing a new system. This will change the future of mining cryptocurrency.
These innovations have already led to increasing adoption of blockchain technology within businesses. Experts predict that blockchain adoption will continue to increase. Adoption will speed up as businesses realize the power and flexibility of blockchain.
In turn, this will increase the size of the network and the need for tokens. This effect will drive investment into the blockchain technologies behind most coins. It will also increase the price of tokens.
Demand will increase, which will drive prices up.
New innovations will undoubtedly have a similar effect. Innovation will lead to more business applications and drive adoption. In turn, demand will increase and prices will rise.
5. More Consolidation of Coins
Another prediction for the future of cryptocurrency is that networks will consolidate.
Currently, there are hundreds, if not thousands, of different coins available. Some of these coins will be successful. Others will be less successful.
Those less successful coins may be bought up by larger networks, like Ethereum or Ripple. Many blockchains are open-source. Smaller networks may still be pulled into the “giants” of cryptocurrency.
This will largely happen based on two factors. The first will be the success of private networks, such as Ripple. The other factor is investment.
If investors choose to back Ethereum, it’s likely it will absorb other, smaller networks. If investors choose to back a private network like Ripple, consolidation is a given.
Changes to the technology may also lead to increasing consolidation within networks. Ethereum’s new proof of stake system could create large returns for a small number of coin-holders. They will claim a larger percent of the available tokens over time.
It remains to be seen exactly how the PoS system will affect in-network consolidation.
What Does This Mean for Investors?
This all seems like good news for those who want to invest in cryptocurrency. The question is less about whether you should invest in crypto and more about which coin you should back.
Bitcoin, Ethereum, and Litecoin remain excellent choices for any portfolio. Investors should be wary about the potential for overheating.
Other coins, like XRP, haven’t seen as much interest from investors. That could change, particularly as institutions continue to back private networks like Ripple.
Researching coins and investing carefully will yield larger returns. Diversifying your portfolio could help you bet on some rising crypto superstars. It also spreads out any potential losses.
Invest in the Right Advice
The markets have been volatile this year, and crypto has been no exception to the rule. A diverse portfolio, research, and avoiding the bandwagon will help you make more of your crypto investments.
If you’re wondering what the markets have in store, check in with us often! We have all the latest trends and tips for smarter investments.