The Future of Cryptocurrency
Although you could still find the word 'Bitcoin' on the front pages of newspapers almost every week in 2018, in 2019 it remained alarmingly silent about this (and many other) cryptocurrencies. And when there was news, it was mainly bad news, such as the cesspool of problems surrounding the launch of Facebook's own cryptocurrency, Libra. For the average Dutch person it may start to look like crypto currencies are already on the decline, but is that picture correct? Do cryptocurrencies still have a future?
From hype to part of society
If we open the history books (probably e-books) in decades to read about cryptocurrencies, its emergence around 2017 and 2018 will be portrayed as a typical example of social hype. All the features were there: the Bitcoin price rose from a few hundred dollars to twenty thousand (!!) dollars each in no time, but also plummeted again just as quickly. Bitcoin was everywhere and all kinds of consumers who had no idea what blockchain means and who had never speculated on the currency market, suddenly turned out to be proud owners of a stash of Bitcoin.
That situation could not last and 2019 proved it. Numerous cryptocurrencies have died in the past year and many new initiatives, such as the Libra, have not (yet) got off the ground. That may seem like bad news, but it is important to realize that cryptocurrencies are anything but gone and that there are countless innovations and developments in that domain. Cryptocurrencies are not away, but the market is developing stabilize. That means that the hype is over and cryptocurrencies can slowly become a part of society, and that has great benefits.
Purpose of cryptocurrencies
Like a hype dies, this often has one important cause: the product does not serve an autonomous purpose. Everyone simply wants it, but after all, the product is useless. Think of the flippo, or the Tamagotchi, or the smartphone with Flappy Bird on it.
Cryptocurrencies seemed to face a similar fate for a long time. The purpose for which they were there (being able to pay without a bank account, being able to carry out money transactions anonymously) was not a reason for most people to bring them into their home. No, they just wanted to make quick money. Speculate on a price rise. And although the demand then grows and the price does indeed rise, it is a castle built on quicksand. As soon as trust shrinks, the demand immediately disappears because the product does not meet an actual need. But that will slowly change in 2020.
Regulation, cleaning and 'halving'
Central banks and other government agencies have been working on increasing cryptocurrencies for some time now at a global level. And although that sounds contradictory – because by the buy Bitcoin couldn't you pay anonymously independently of a bank? – that's probably good news. In the right degree, regulation ensures greater safety and reliability.
In that context, it is also good that so many shadowy cryptocurrencies have been exposed or disappeared in recent months. Ultimately, the consumer benefits from a market that can in principle be trusted. An image as a 'black market means of payment' does not help. The supply of currencies has dwindled, but the currencies that remain are on average of high quality.
What's more, is that it mine of new Bitcoin will become less profitable next year because the process will take twice as long. This phenomenon is called halving and will in any case ensure that the price of Bitcoin will get a boost – after all, the increase in supply is decreasing.
If that regulation and cleaning work out well and no new excesses arise, cryptocurrencies will effortlessly take up a useful position in society. An accessible platform on which money transactions are possible even without a bank account (and there are still 1.7 billion people worldwide who do not have one) and without the intervention of organizations that want to get a piece of the cake. The hype is then over and the social interest is born. Speculation on spectacular price fluctuations is then a lot less exciting, but maybe that's for the better.