Will Crypto Go Back Up: Everything to Know
By Beluga Research September 5, 2023
- Cryptocurrency's future price increase potential examined: Will crypto rebound from market downturns?
- Cryptocurrencies like Bitcoin operate on decentralized networks called blockchains, using complex algorithms and cryptography to secure transactions
- Market sentiment, adoption and use cases, technological advancements, regulatory landscape and market cycles influence the price movement of cryptocurrencies
- The advantages of cryptocurrencies include decentralization, security and global accessibility
Cryptocurrencies have the potential to increase in value the more they are utilized and accepted. One of the questions about digital currencies is how they will evolve in relationship to traditional (fiat) currencies. Will the two types of currencies complement one another? Or, as cryptocurrencies become more widely accepted, will cryptocurrencies start to eclipse traditional currencies?
Cryptocurrencies have a lot of room to grow. Currently, many businesses, governments and users view them with suspicion because of their security vulnerabilities. The relative lack of regulation and the complexity of cryptocurrencies are other challenges. Further, some cryptocurrencies rely on mining methods that pose environmental concerns, like a high use of electricity. As the crypto ecosystem develops more safeguards, education, opportunities and invitations to different audiences, it has the opportunity to expand its user base and increase acceptance.
A Brief History
The first cryptocurrency was Bitcoin, which the anonymous individual or group Satoshi Nakamoto introduced in January 2009. The use and development of Bitcoin has influenced other cryptocurrencies, called altcoins. Bitcoin's value remains a market for the health of the crypto ecosystem.
The crypto ecosystem has always been volatile. It has seen extreme highs, such as the 2017 surge in prices. At that point, bitcoin reached an all-time high of close to $20,000. This upswing was followed by a bear market in 2018. Since those years, the crypto ecosystem has seen periods of growth and decline. The values of cryptocurrencies fluctuate in response to political and financial trends. Cyber attacks and announcements about government regulation impact the equation.
Will Crypto Go Back Up: Everything to Know
Several factors influence the price movement of cryptocurrencies. These factors can act alone or in concert. The multiplicity of factors and the fact that crypto trading occurs in a 24/7 market make it challenging to know whether a particular cryptocurrency will increase in value. The factors include:
- Market Sentiment. Crypto prices are influenced by market sentiment. Positive news like regulatory developments or institutional adoption drives prices up. Negative news usually drives prices down. Market sentiment is influenced by factors like investor confidence, global economic conditions and geopolitical events like conflicts.
- Adoption and Use Cases. The adoption of cryptocurrencies in various industries and their practical use cases plays a significant role in their future value. Widespread acceptance and integration into everyday transactions drive prices up. Developments in decentralized finance (DeFi) applications, non-fungible tokens (NFTs) and other innovative use cases also drive prices up.
- Technological Advancements. The technology behind cryptocurrencies, like blockchain, continues to evolve. Platform improvements in scalability, security and efficiency positively influence the market. Upgrades like Ethereum's transition to a proof-of-stake (PoS) consensus mechanism and the development of layer 2 solutions address scalability challenges and enhance the ecosystem.
- Regulatory Landscape. Regulations surrounding cryptocurrencies significantly impact their future. Clear and favorable regulations can foster investor confidence and encourage institutional participation. This usually drives prices up. Strict regulations or government bans typically create uncertainty and hinder market growth.
- Market Cycles. Cryptocurrencies have historically experienced boom and bust cycles. These cycles involve rapid price appreciation (bull markets) followed by significant corrections (bear markets). Understanding these cycles is crucial for assessing the likelihood of crypto going back up. Analyzing historical patterns provides insights into future trends.
Cryptocurrencies tend to increase in value when one or more of the following events occurs:
- A platform makes improvements like increasing scalability. Less congestion and lower gas fees positively impact not only that coin but the entire crypto ecosystem.
- A platform finds a way to operate in a more eco-friendly way.
- A platform welcomes a new group of users. Such an action increases access. Creating educational materials and promoting a coin online help to welcome users.
- A platform offers new ways for users with less internet access to get involved.
- A platform receives positive attention in the press. A platform can generate publicity for itself by sending out press releases. It can also share announcements on its website, through web forums and social media.
- A platform makes a coin more accessible. A platform can do this through air drops, offering a set amount of the coin for free or in exchange for a task like mentioning the coin on a web forum.
- A platform gains partners. Such a move is a win for the coin and the crypto ecosystem. This step shows the crypto ecosystem can be collaborative and productive.
- A platform expands its set of digital assets, like adding a new coin. This includes offering new opportunities for investors to make money, like providing the opportunity to stake coins.
- A platform creates safeguards against manipulation. An announcement that a cryptocurrency has prevented a major attack is a win.
- A platform takes steps to compensate investors in the event of losses. There is typically a cost to such measures, like higher gas fees. A platform needs to strike the right balance between the price of the measure and the benefit to investors.
- A platform takes steps to increase privacy, when requested, or increase transparency, when requested. Each type of action can benefit investors in a community.
Factors that influence the value and growth potential of cryptocurrencies include:
- Market Volatility. Cryptocurrencies are known for their volatility. Volatility presents opportunities and risks for investors.
- Limited Supply . Many cryptocurrencies, including bitcoin, have a capped supply. This means only a set number of coins can be created. A limited supply can create scarcity and drive up prices if demand increases.
- Decentralization. Cryptocurrencies operate on decentralized networks. They do not need intermediaries like banks. Decentralization enables peer-to-peer transactions, increases transparency and security and appeals to those seeking financial sovereignty. Decentralization contributes to the long-term value of cryptocurrencies.
- Technological Innovation. Cryptocurrencies are built on innovative technologies like blockchain. The benefits of blockchain include transparency and enhanced security. Increased blockchain adoption fuels demand for cryptocurrencies and drives up their values.
- Global Reach. Cryptocurrencies transcend geographical boundaries, enabling easy cross-border transactions. This is valuable in countries with limited access to traditional banking services. Quick and low-cost fund transfers of cryptocurrencies drive adoption and promote the use of crypto assets.
- Decentralization. Most cryptocurrencies operate on decentralized networks like blockchain, removing the need for intermediaries. Decentralization gives individuals greater control over their funds. It also reduces the risk of censorship and manipulation.
- Security . Cryptocurrencies use advanced cryptographic techniques to secure transactions and protect digital assets. Public and private keys ensure only authorized users can access funds. This reduces the risk of fraud and identity theft.
- Global Accessibility . Cryptocurrencies are usually accessible to anyone with an internet connection, regardless of location. This reduces barriers associated with traditional banking systems. It increases users' participation in the global economy.
- Financial Inclusion . Many cryptocurrencies can provide financial services to unbanked and underbanked populations. Individuals without access to traditional banking have options to store, send and receive funds.
- Potential for High Returns. The cryptocurrency market experiences significant price volatility. This offers the opportunity for substantial returns as well as increased risk.
- Price Volatility. Values can fluctuate dramatically, leading to potential gains or losses. Volatility stems from factors like market speculation, regulatory changes and technological advancements.
- Regulatory Uncertainty . Regulations for cryptocurrencies are still evolving in many countries and areas. Uncertainty creates risk for investors and businesses. Changes in regulations or government policies can negatively impact price and adoption.
- Lack of Consumer Protection . Cryptocurrencies generally lack the same consumer protection measures as traditional financial systems. Chargebacks or insurance on funds held in cryptocurrency wallets are rare. If funds are lost or stolen, recovery may be difficult or impossible.
- Energy Consumption. Some cryptocurrencies, like bitcoin, face criticism for their energy-intensive mining processes. Mining requires substantial computational power and electricity.
- Adoption Challenges . Cryptocurrencies have gained international attention, but many merchants and businesses do not understand how they work. They are also concerned about security vulnerabilities. The crypto community can combat this by increasing safeguards and offering promotions and education to merchants and businesses. Such work takes time, money and a shift in attitude. The crypto community needs to consistently put in the effort.