The Future Of Cryptocurrency Will Includes A Near Bottom Collapse In 2022

On September 7, 2022, one year after Bitcoin was first used, a sign for a Chivo Bitcoin ATM will be up in San Salvador, El Salvador. El Salvador has been using Bitcoin as legal currency for a year now, and the government has bought more than 2,000 bitcoins at prices close to their highs. So far, the country has lost more than half the value of the bitcoins it has bought.

Cryptocurrency is seen as a risky investment and a way to save money.

It is not becoming more popular as a way to pay for everyday things.

Ignore, ban or regulate? Most likely, governments will choose the third choice.

What will happen?

Figuring out what will happen with cryptocurrencies in the future may help to look at what has already happened and clarify a few key points. First, the blockchain world is made up of cryptocurrencies and things that are based on cryptocurrencies. Bitcoin is an example of a cryptocurrency, while Tether and TerraUSD are examples of crypto derivatives.

These are “derived” from cryptocurrencies or tied to a well-known, centralized currency like the dollar. Simply put, a financial investor gives money to a company and gets something in return called a derivative. The company turns the dollars into cryptocurrencies and then lends them to borrowers worldwide. While simultaneously promising the financial investment that the derivatives will be exchanged on demand for a fixed amount of a specific cryptocurrency backed by dollars or tied to them, the company promises to exchange them.

In the end, if you buy Bitcoins or other cryptocurrencies, you win or lose based on how much the currency in your portfolio is worth. If you buy a derivative, you may find out that a large enough number of cryptocurrencies does not back or that the guarantee that it can be turned into dollars is, to put it mildly, not solid. If that’s the case, the derivative doesn’t have much value.

This happened with a few crypto derivatives over the past few months. Companies that sell these products are very active on the market and help make the underlying assets volatile, especially if they promise great returns, which increases the demand for cryptocurrencies and crypto derivatives. When times are bad, investors are scared away from derivatives products that aren’t well-backed.

The cryptocurrency market crash in 2022

It has affected the world of derivatives, which could eliminate a big source of volatility.

The second important point is that cryptocurrencies are currently seen more as a way to speculate and save money than as a way to pay for everyday transactions. For example, more than 60 percent of all bitcoins in circulation are held in accounts (called “wallets”) with more than 100 bitcoins each. These bitcoins are rarely traded on the market, except to adjust portfolios. In late July 2022, only about 250,000 bitcoins were traded daily, and only a small portion was likely for commercial transactions. Also, people who own cryptocurrency seem to think about the future. For example, both “shrimps” (accounts with less than 1 Bitcoin) and “whales” (accounts with more than 1,000 Bitcoins) have taken advantage of the recent sell-off to buy the dip in large amounts.

Here are three quick conclusions:

The typical cryptocurrency holder thinks about things in the long run, which suggests that the cryptocurrency project is not easy to kill and can survive big swings.

The volatility has been caused by crypto derivatives, whose activity has been amplified by the small number of cryptocurrencies traded on the market.

The crypto market crash in 2022 has affected the world of derivatives. It may have removed a major source of volatility by killing some market movers. It has also hurt short-term speculators and given long-term crypto investors opportunities.

Bitcoin value tumbles

Cryptocurrencies differ from stocks and bonds, backed by guarantees of future revenue streams, sometimes produced by a company’s strong market performance and sometimes by a government vow to pinch taxpayers. A cryptocurrency, on the other hand, has no backing. Their value depends on how reliable they are as a future way to pay for goods, services, and other ways.

The safest course of action ultimately seems to be regulation.

Policymakers and central bankers, in general, use every opportunity to inform the public that cryptocurrencies are frauds. The European Central Bank’s head, Christine Lagarde, recently said that cryptocurrencies are “based on nothing” (which is true) and “worth nothing” (which is not true) and that they need to be regulated so that inexperienced investors don’t lose all the money they put into them (incorrect).

Ironically, central banks offer digital currencies, which President Lagarde believes are “vastly different” from cryptocurrencies. Central bankers’ digital currencies differ from cryptocurrencies based on blockchain, but probably not what Ms. Lagarde thinks of. The main problem is that a decentralized currency with a supply cap would make monetary policy meaningless and turn central bankers into a group that regulates commercial banks and makes statistics. The world of central banks is unhappy about this, which makes sense.

In other words, despite claims to the contrary, central bankers do not oppose cryptocurrencies. If “scam” means “based on zero,” all central capitalist should be brought to court. Their dislike comes from the widespread use of cryptocurrencies will eventually hurt the power of central banks, which could affect how public debt is paid for, for example.

Scenarios

Policymakers and people in charge of the central bank have three options.

Ignore

They can choose to ignore, ban, or control cryptocurrencies. The easiest thing to do is the first one. Why should central bankers care? After all, there is a lot of competition in the world of cryptocurrencies, and some currencies will disappear. Also, they don’t pose a real threat to money today. It isn’t easy to switch from dollars or euros to one or more cryptocurrencies since each transaction still costs a lot. As governments only accept centralized currencies like dollars and euros, moving to cryptos would be the same as switching to a double-currency system that many people would dislike. In the past, these rules were in place for short periods.

Prohibit

It wouldn’t make much sense for the government to ban cryptocurrencies unless they were worried that large transactions involving cryptos could make the exchange rates between cryptos and fiat currencies unstable. Also, making cryptocurrency illegal must be done on a global scale. If some countries didn’t follow the rules, they would lose credibility. This approach has a problem in that crypto derivatives and cryptocurrencies are not crimes, and it’s unclear if those who purchase them act against the public interest.

Control

In the end, it looks like the safest thing to do is to follow the rules. Since there is no real threat to fiat money as a way to pay in the short term and no proof that it is used to launder money, taxation is the only real worry of the government. This is the one thing that the regulator is likely to pay attention to. Cryptos are not decentralized, so this has little to do with them. Instead, it’s because the tax collector can’t find out how much money a taxpayer has stored away, and it’s hard even to tell if someone has an account. In the future, regulations will try to force more transparency so that this kind of wealth can be tracked and taxed.

The European Parliament approved the Market-in-Crypto-Assets proposal at the beginning of July. If this is done everywhere, crypto-asset providers won’t be able to do business without permission. This permission will almost certainly come with conditions. In theory, these conditions will protect investors from fraud, but they will force investors to make their accounts public. This is just the start unless technology makes licensed dealers obsolete.

#Disclaimer Note : This publication is not intended for use as a source of any financial , money making legal, medical or accounting advice. The information contained in this guide may be subject to laws in the United States and other jurisdictions. We suggest carefully reading the necessary terms of the services/products used before applying it to any activity which is, or may be, regulated. We do not assume any responsibility for what you choose to do with this information. This article is not meant for financial advice , Use with your own judgment.

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