Cryptocurrency weekly outlook
Developing countries have started using digital currency as a financial exchange medium. The increasing popularity of digital assets like Bitcoin and Litecoin is likely to drive market growth in the forthcoming years. Moreover, digital currency is also often utilized with the integration of blockchain technology to attain decentralization and controlled efficient transactions.
Blockchain technology offers decentralized, fast, transparent, secure, and reliable transactions. With these advantages of blockchain and digital currency, companies are investing in cryptocurrency and collaborating with other companies to deliver efficient and quality services to the users.
Such initiatives by market players are expected to contribute to the growth of the market. Due to the collapse of the initial coin offering ICO market, blockchain firms are now largely attempting to obtain investment funding. To alleviate the economic consequences of the COVID pandemic, large blockchain enterprises such as Elliptic, Chainalysis, and CipherTrace have indicated that they have cut their workforce or budgets. The constraints and economic problems induced by coronavirus have left several token sales without investment while causing others to delay their production.
The recent research study by ICOBench in reveals that the contributions made by the companies during the last week of January to the first week of February were significantly smaller in the same timeframe compared to last year. Moreover, the virus spread has forced crypto companies to implement work from home strategy and has delayed many business partnerships. If Bitcoin continues to outperform conventional markets, it may certainly spark further interest in crypto as an alternate and sustainable form of currency.
Growing Adoption of Digital Currencies will have Profound Impact on the Market The popularity of virtual or digital currency such as Bitcoins, Litecoins, Ethers, and many more are expected to drive the market in the forthcoming years.
People from developed countries are likely to adopt the easy and flexible transactional method offered by digital currency. This popularity of virtual currency as an exchanging medium led the central bank to support digital currency. Several companies, such as Facebook, Inc.
For instance, in June , Facebook, Inc. Libra will enable customers to buy things or send money to others and cash out Libra online or at grocery shops. Additionally, companies can benefit from fluctuating digital currency prices and strengthen their digital assets. Financial uncertainty disturbs the economy by dropping the value of the currency.
With Bitcoins or other cryptocurrencies, there is no major effect of the financial crisis on it as its value is balanced universally. Cryptocurrencies are better options in financial uncertainty for the regions with unstable economical structures, which is becoming a major market driving factor for the market. Increasing Adoption of Bitcoin to Witness Exponential Demand for Cryptocurrency Market Bitcoin is one of the most popular and majorly adopted digital cash across the world.
The rising visibility, growing interest of investors, and supporting regulations are further augmenting the market's growth. Developing countries like Japan, the U. It has been seen that many unlawful activities like tax evasion, money laundering, and terrorist financing have been carried out by criminals using digital money. Moreover, growing security concerns and cyber-attacks have led to the loss of the invested currencies, limiting the adoption of cryptocurrencies.
For instance, In February , digital currency exchange platforms of Okex. Com and Bitfinex companies were disrupted with Denial of Service attacks. Criminals and terrorists are more inclined to deal in cash and keep cash as collateral than to use financial intermediaries such as banks and avoid anti-money laundering reporting and compliance regulations. Businesses and governments became worried that the pseudonymous and decentralized nature of digital currency transfers might offer a way for criminals to conceal their financial activities from the authorities.
For instance, Bitcoin was used on the web-based, illegal drug market called Silk Road. This exchange and Bitcoin escrow program allowed more than , illegal product transactions from about January until October , when the government shut down the company and detained persons operating the platform. Criminal usage of virtual currencies would not automatically mean that blockchain is a net negative for the community since its advantages may outweigh the social expense of increased criminality enabled by virtual currency.
Law enforcement agencies have the potential to minimize the usage of digital currencies to prevent law enforcement. In addition to the ability of law enforcement to prosecute violence, the government has the right to restrict digital currency exchanges to legislation relating to the monitoring of criminal behavior. ASIC mining hardware is expected to hold the largest share mainly due to its high performance and high hash rate while mining a specific coin.
The software segment is further categorized into mining software, exchange software, payment, wallet, and others. Exchange software uses a trading engine that is a single interface for connecting offers and exchanges with digital currency derivatives. The platform is used to match, sell and buy from users, thereby holding the largest share in the market.
Significant dispersion of exchange platforms is likely to drive the market globally. In this cycle, the liquidity tap dried up as inflation concerns gripped the market. Central bank liquidity and government stimulus fueled the speculation driven crypto cycle. For this reason, day to day crypto traders are focusing on what the U. Federal Reserve plans to do with its interest rates and availability of dollars.
To find a bottom, there are two liquidity related factors to look out for. First, market expectations that central banks will continue to tighten the money supply, turn into expectations that central banks will resume monetary expansion. Second, crypto companies increase appetite to build crypto leverage again. Both of these would increase liquidity and drive a new cycle of speculation.
Which brings us back to the question about the bottom of the crypto cycle that almost everyone is asking: are we there yet? To answer that question, look at bitcoin creation, past cycles and above all, liquidity. Thanks for listening. If you enjoyed Thoughts on the Market, share this and other episodes with a friend or colleague today.
Tweet this Share this on LinkedIn Share this on Facebook Email this Print this As bitcoin has been experiencing a steep decline in the last 6 months, investors are beginning to wonder when Cryptocurrencies will finally bottom out and start the cycle anew.
NOTE: Digital assets, sometimes known as cryptocurrency, are a digital representation of a value that function as a medium of exchange, a unit of account, or a store of value, but generally do not have legal tender status. Digital assets have no intrinsic value and there is no investment underlying digital assets.
Investing in digital assets is risky, and transacting in digital assets carries various risks, including but not limited to fraud, theft, market volatility, market manipulation, and cybersecurity failures—such as the risk of hacking, theft, programming bugs, and accidental loss. Additionally, there is no guarantee that any entity that currently accepts digital assets as payment will do so in the future. The volatility and unpredictability of the price of digital assets may lead to significant and immediate losses.
It may not be possible to liquidate a digital assets position in a timely manner at a reasonable price. Regulation of digital assets continues to develop globally and, as such, federal, state, or foreign governments may restrict the use and exchange of any or all digital assets, further contributing to their volatility. Digital assets stored online are not insured and do not have the same protections or safeguards of bank deposits in the US or other jurisdictions.
Digital assets can be exchanged for US dollars or other currencies, but are not generally backed nor supported by any government or central bank. Before purchasing, investors should note that risks applicable to one digital asset may not be the same risks applicable to other forms of digital assets. Markets and exchanges for digital assets are not currently regulated in the same manner and do not provide the customer protections available in equities, fixed income, options, futures, commodities or foreign exchange markets.
Morgan Stanley and its affiliates do business that may relate to some of the digital assets or other related products discussed in Morgan Stanley Research. These could include market making, providing liquidity, fund management, commercial banking, extension of credit, investment services and investment banking. Thoughts on the Market is also available on Apple Podcasts, Spotify, Google Podcasts and other major podcast platforms.
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