Cryptocurrency between investing and trading

1. Introduction

There are over a thousand different cryptocurrencies and digital assets being traded on the global market. Many of which have seen the rise and fall in a short time span. It would be early to decide the true top tier of them at this point in time. That being said, there is a general consensus that the top cryptocurrencies in performance and market capitalization hold the most value.

The significance of cryptocurrency opens a door to a new era of commerce. The significance of cryptocurrency is the next level in online and mobile commerce. The migration to cryptocurrency and the blockchain is inevitable. This is due to its lower processing fees than traditional credit card payment methods. Due to high security, it prevents identity theft, ensuring customers’ peace of mind. Cryptocurrencies can be transferred to and from two parties with the use of public and private keys and do not require long processing times. Long gone are the days of waiting 3-5 days for bank transfers. This is a result of a shift to instant gratification, with consumers wanting to get their transactions done fast. This is projected to see this shift to cryptocurrency lead to an elevation of e-commerce and mobile commerce. Cryptocurrencies are also international, making it a primary solution in currency exchange due to its globally free market. This has allowed for remittance (sending money back to families in foreign countries) to become a much cheaper and efficient process. Cryptocurrency has also opened the doors to employment for technology and service sectors to work with blockchain companies. The gains on cryptocurrency investments have also led to a rise in global wealth. With all of these factors in mind, the significance of cryptocurrency is only set to rise higher as the years progress.

Cryptocurrency is the latest innovative invention in technology. A cryptocurrency is a digital currency using cryptography for security. It is very difficult to counterfeit a cryptocurrency, making it safe and secure. Cryptocurrencies are decentralized and are usually based on the blockchain. The blockchain is a distributed ledger enforced by a disparate network of computers, making it the official record-keeping method. It is the backbone of cryptocurrency. Decentralization is a key component. This means a central bank does not issue a cryptocurrency and there is no one authority figure, making it immune from manipulation and government interference. Due to it being decentralized, it is also open to the public. All information is open to the purchase and sale of cryptocurrencies, making the market a competitive free market at its purest. Because of its lower competition in contrast to other financial markets, it may give various high returns and be able to trade 24/7. The supply of cryptocurrencies is usually controlled and it is in the system and can only be changed by specific conditions. The value of cryptocurrency is directly related to supply and demand. These factors make it an alternative speculator’s dream in comparison to other markets.

1.1. Definition of Cryptocurrency

Cryptocurrency can be simply defined as a medium of exchange that is strictly digital and uses cryptography to secure financial transactions, create additional units, and verify the transfer of assets. A fundamental feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them immune to government interference or manipulation. Designed to be fully decentralized, they are intended to be free from control of individuals, corporations, and governments. This, in itself, is perhaps one of the defining features of cryptocurrencies – they are disengaged from the shadow of a central authority, which can potentially undermine state monopolies such as currency and fiscal policy. This specific factor contributes to the global and refreshing nature of cryptocurrencies, fostering innovation and competition between people all over the world. Of course, this idea is very much in its infant stage and there are various implementations of how a cryptocurrency can be decentralized, giving rise to the research of ‘distributive consensus’ to achieve a consistent global consensus. However, it remains a strong goal for many cryptocurrency projects, and its power in shaping the landscape of cryptocurrency should not be underestimated.

1.2. Importance of Cryptocurrency

Staying with the subject of application, we discover that another identifying element of the significance of a cryptocurrency is its function as a token on a dispersed application platform. This is best represented by the current rise of Initial Coin Offerings (ICOs) and the remarkable pattern of economic investment in Ethereum. ICOs are crowdfunded tasks which offer investors the chance to redeem tokens with a recognized cryptocurrency in the intend to produce a decentralized business that utilizes the blockchain. Usually, tokens are particularly created for the improvement of a DAPP and function as a reward system for users getting involved in the network. Utilizing the ERC20 token requirement, tokens can now be provided on the Ethereum blockchain as opposed to producing an entire brand-new blockchain. This streamlines the job and resources needed for the token developer whilst supplying high compatibility and performance. Because of this, numerous organisations and business owners are now choosing this approach.

The importance of a cryptocurrency is mainly determined by its applications. An electronic currency will be the most effective in settling transnational deals and for that reason, it is not unexpected to have a fantastic reaction to the advancement of bitcoin and its siblings. The innovation alone of blockchain is a stunning effort and applying the innovation to currency additional enhances the appeal of cryptocurrency. Bitcoin as a pioneer has actually shown that a cryptocurrency can be a feasible alternative to nationwide currencies, looking for to make a favorable effect worldwide.

1.3. Overview of Top Cryptocurrencies

The team at “Bit Guru” believe that the best 2 resources to use when researching the best cryptocurrencies are Reddit and the Bitcointalk forum. Unfortunately, many people are quick to invest their money into cryptocurrency without realizing what the coin does or the companies’ goals for the coin. Reading through the cryptocurrency’s subreddit and Bitcointalk forum will give you a good idea of what the community believes to be the strengths and weaknesses of the coin. Reading through the forums and Reddit will also give you an idea of how big the community is and how active the development team is. This is valuable information when deciding on what the right investment is for you. Both Reddit and Bitcointalk have large communities from all over the world and have expert investors for all types of different coins so you will be sure to get every question answered, no matter how simple or complex.

There are many cryptocurrencies now, and it seems as though a new one is being released every day. This can make it difficult to keep up with the best ones, and can take up a lot of time when researching what each one does. Whether you are new to investing in cryptocurrency or have been investing for years, it’s always good to review what the best options are. There are many aspects to look into when choosing what the best cryptocurrency is for you, depending on what you are looking for in a coin whether it be long term investment, or if you want to be actively trading on a daily basis. Generally, the top cryptocurrencies all share very similar goals so there are a few strong characteristics to look for in deciding the best one. These include: Security, decentralization, speed and lastly, cost.

2. Factors Influencing Cryptocurrency Market

Overall, demand and supply of cryptocurrencies are largely influenced by word of mouth and the price volatility that has been seen across this market. Step changes in price and increased large transaction price movements are indicators of a change in demand or price manipulation usually caused by the release of new information regarding a specific cryptocurrency. The price inelastic nature of demand and market longevity make the demand and supply of cryptocurrency multifaceted and a highly complex economic system.

There is, of course, also an elasticity of demand due to the currency nature of cryptocurrencies. Increased geopolitical instabilities can lead to demand in alternative currency, and because cryptocurrencies are global in nature, a crisis in a secluded geographic location may still influence the global cryptocurrency market. Demand is largely driven by price and does not exhibit significant elasticity.

A more likely scenario is a decrease in speculative buying. This is seen as very healthy and is the only kind of market elasticity that can move cryptocurrency value closer to its inherent value. This is because the speculative nature of these markets has led to cryptocurrency market caps far exceeding the amount of capital that has been invested into an individual coin.

Cryptocurrencies can have a level of price elasticity that makes them more susceptible to market volatility. If a cryptocurrency is perceived to have a low price, it may dissuade miners from dedicating hashpower to validating transactions on that particular blockchain. This could lead to consensus mechanism failure and require either a change in the manner by which validation occurs, or adoption of a new blockchain by the developers. These scenarios are, however, less likely to occur with good cryptocurrencies and are more probable with failed or failing altcoins.

Unlike traditional fiat currencies, the supply of most cryptocurrencies is not determined by the presence of a central bank. Instead, commodities like bitcoin have a predetermined supply. The supply and demand of a cryptocurrency is constantly in flux and is influenced by a multitude of factors.

2.1 Factors Influencing Cryptocurrency Market 2.1.1 Market Demand and Supply

2.1. Market Demand and Supply

There are a few other factors from determinants of price which occur on a demand curve for a product, which can affect the price of a cryptocurrency. Consumer income is the income available for consumers to spend on a good or service. As this increases, the demand for normal goods and services will also increase. For a cryptocurrency, when income increases, there is relatively more income available to invest in speculative investments such as cryptocurrencies, so an increase in income will cause an increase in demand for cryptocurrencies. Changes in expectations of future prices can affect the demand of a product. If consumers think that they can buy a product for a cheaper price in the future, then the demand for that product now will decrease, and if consumers expect the price to rise in the future, then demand will increase. This is a significant factor for demand of cryptocurrencies and a reason why they are often so volatile in price. Apart from the determinants of price on a demand curve, another factor for demand which is often significant for a product is its price in relation to substitute goods. For a cryptocurrency, the substitute good is often another cryptocurrency.

Supply and demand are two factors that have a major influence on the price of any product, including cryptocurrencies. The phenomena of supply and demand is the availability of a product (supply) and the desire for that product (demand) which together directly influence the price of that product. If there is a high demand for a certain cryptocurrency but a limited supply, then the price of that coin will rise. On the contrary, if the demand for the coin is low but there is a large supply of it, the price will decrease. As the price changes, it causes a change in supply and demand. An increase in price causes an increase in supply as the producers of a product look to make more money, and a decrease in demand will cause a decrease in price to try to entice consumers to buy.

2.2. Regulatory Environment

The current legal environment has a very large impact on the potential demand for cryptocurrency in any given country. In countries which have nationalized most services and industries and thus have minimal foreign exchange risk, the demand for a currency uncorrelated with foreign exchange rates such as Bitcoin may be very small as the benefits of such safety are not felt by many individuals or firms. In contrast, countries with either unstable economies or very large multinational firms or industries have a much higher demand for alternatives to domestic and/or foreign currencies. An example of the former is the Euro currency. Before any of the Eurozone nations joined it, they did not have a recognized national currency and thus foreign exchange currency was a liability whenever purchases were made with other Eurozone countries. During this time, it was a common practice for businesses to either lose revenue from unfavorable exchange rates or simply purchase the other nation’s currency and keep it in reserve, which goes the same for the government with regards to international transactions. In both cases, they were essentially incurring a foreign currency exchange liability. The latter group is in a similar situation. Large firms and multinational have similar exchange rate risks and costs while using funds or property to redress a wrong with foreign currency. They too would prefer to no longer have that liability.

This particular aspect of a nation’s environment for cryptocurrency may not mean the standard utilization of “liability” as it is understood in English. Typically, the legal implications of something being a liability is that it is the duty of the possessor of the liability to repay damages or losses incurred on the object. However, in international law, this is not the binding element as there are many sovereign and private actors which do not adhere to judgments of international courts and tribunals. Therefore, in assessing the legal nature of cryptocurrency in different countries, it is best to ask whether the possession or creation of the currency leads to a possibility that someone will have to use funds or property to redress a wrong. This is more akin to the understanding of liability found in common law and equity.

2.3. Technological Advancements

Note: As a cryptocurrency enthusiast and investor myself, I find consensus algorithms thoroughly interesting, as it is the engine that drives the cryptocurrency. Before learning about this topic, I had never taken the time to understand how the traditional credit card transaction works, or the role of a bank in this process. I learned that cryptocurrency offers a few different methods to process a transaction which are proof-of-work, proof-of-stake, proof-of-activity, proof-of-burn, and the more recent proof-of-weak-hand. With cryptocurrency being very much the antithesis to the current financial world, it seems the traditional credit card transaction is still better mirrored by proof-of-work cryptocurrency transactions. In this process, a credit card swiping customer is represented by a single transaction bunching into a batch of purchases, and the bank representative is akin to the miner. In both cryptocurrency and traditional transactions, there is often a need for trust to be established between two unknown parties who are dealing with each other for the first time. The obvious contrast is that credit card users are familiar with the trust establishment process between the bank and merchant, but are unaware of the frequent fraudulent transactions costing billions of dollars annually, and the cost at which these incidents impact their future credit card interest rates. Now let us compare the various transaction processing models offered by cryptocurrencies to this traditional process. Proof-of-work is employed by the most recognized cryptocurrency to date, Bitcoin, and is in essence mirroring the credit card transaction batch processing and the subsequent trust establishment between customers and their banks. In the case of Bitcoin, it is the miners who batch multiple unconfirmed transaction records into a block before solving a cryptographic puzzle which ultimately confirms the block and transactions within. While this method of transaction processing achieves its end, the high electricity and hardware costs for miners, and block confirmation finality can become a protracted process for transactions. Still, proof-of-work currency retains very high community confidence and liquidity as miners can easily convert mined coins to traditional currency.

2.4. Investor Sentiment

Whilst the theory on investment and emotions has generated substantial debate as to whether investor sentiment is a cause of overvalues in markets, there is evidence of the existence of herding behaviour in many financial instances (Gee, 2005). The work by Baker and Wurgler (2007) is a study on investor sentiment and how it has a large impact on the decision-making process in investments. They define investor sentiment as an opinion on future cash flows and investment returns. This can be positive leading to overvaluation on an investment or negative on future returns that would undervalue an asset. Their study was compiled on a comprehensive list of behavioural measures of investor sentiment grouped into 5 categories – trading volume as a measure of attention, closed-end fund discounts, fund manager’s investment style, an allocation of household financial assets to stocks and a survey on investor expectations. The results of their study were that shifts in investor sentiment were persistent and had a strong effect on the investment climate which would lead to inflating and depressing asset values from the norm justified by current and expected cash flows. This herding between investors has also led to price bubbles and crashes in financial markets that are unrelated to the assets intrinsic value. The most recent example of this was the 2008 financial crisis which was caused by the sub-prime mortgage crisis on the housing market. The case on the housing bubble is an interesting one as there is a divide on the cause of the bubble inflated house prices. The traditional view for this was that it was mainly due to the Federal Reserve keeping interest rates too low which would affect an increase in investment and borrowed money on housing; Keynesian economics would demonstrate this as an increase in demand. However, it was argued by Case and Shiller (2003) who are authors of the book “Irrational Exuberance” that the real cause of the housing bubble was investor sentiment. With the burst of the dot com bubble and a post 9/11 stock market crash it was evident that many investors had a negative sentiment on expected future returns on stocks and thus turned to the housing market as an alternative investment strategy. This increase in demand with investors paying over the odds on mortgages led to high prices and high speculative building in housing which was a classic case of overinvestment. The burst of the housing bubble was the moment when sub-prime borrowers with poor credit and excess mortgages were unable to meet high mortgage payments which had adjustable rates. This led to a chain of mortgage defaults and increased housing supply due to forced sales of homes which then led to collapse of prices and the bubble was evident. This case on the housing market is identical to future speculation on price movements of an asset and has strong evidence that the cause of bubble and overprices at the time was purely down to investor sentiment.

3. Benefits and Risks of Investing in Cryptocurrency

Cryptocurrencies are one of the best performing asset classes in the last 12 months, with price growth outstripping just about everything else. The $10,000 invested in Bitcoin a year ago would be worth over $50,000 today. The great thing about cryptocurrencies is that they offer the potential for very high returns due to their meteoric price rises. A well-known story is that of a Norwegian student who bought $27 worth of Bitcoins in 2009, forgot about them, and a few years later realized they were worth almost $1m. The downside is, of course, that like any investment the potential for high returns is accompanied by high risk. Now that the prices of Bitcoin and Ethereum have reached all-time highs, the question is, how much further can they realistically go? At this point, they are wrestling with the possibility of a price bubble, with the prices for many cryptocurrencies increasing rapidly, and there are also warning signs in terms of the potential bursts of different exchanges and platforms. Step forth with caution is the advice here.

Although cryptocurrencies have some way to go before they are considered a mainstream investment, they’ve certainly generated a lot of interest in the last year, not least because of the sky-rocketing performance of the likes of Bitcoin and Ethereum. But is investing in cryptocurrencies right for you? The potentially high returns are, of course, tempting, but there are various factors that every investor should consider before jumping into this particular market.

3.1. Potential Returns

In terms of high-risk, high-reward potential, the cryptocurrency market is unmatched. Certainly, some of the best-known and trusted cryptocurrencies are not very volatile when compared to fiat, or even stocks or commodities… but it remains the case that investing in cryptocurrencies is essentially investing in the future of a technology still in its infancy. So given that the potential for profit from the most established, “blue chip” cryptocurrencies is not that different from what is considered a safe investment, this article will focus on the plethora of higher risk, higher reward investment options. Most seasoned investors would define an investment’s potential for return by both its projected return on capital and the likelihood of that return being realized. The likelihood-weighted return on capital formula is a simple way of expressing this. Cryptocurrencies are a highly speculative investment. There are over 1500 cryptocurrencies currently on major public blockchains and many, many more on private blockchains. Each of these represents an early stage venture, the future of that venture and the teams behind it are for the most part completely unproven. By investing in a cryptocurrency, you are effectively betting that the venture it is connected with will succeed. Understanding the competitive nature of the tech industry as well as the cryptographer’s dilemma is important when considering the probability of a given cryptocurrency’s success. Now while it has been widely speculated that the best use case of bitcoin is as a store of value, the majority of cryptocurrencies are still attempting to deliver or monetize some kind of utility. This is something to consider when looking at the makeup of your cryptocurrency portfolio and its desired risk/return profile. While the cryptocurrency that is most similar to a utility it is looking to deliver should technically have the least opportunity cost… the more speculative an investment, the higher the potential return or loss.

3.2. Portfolio Diversification

Returning back to Modern Portfolio Theory, the highest form of diversification is the acquisition of a risk-free asset, for which all further gains will be invested in a slate of high variance/high expected value investments. In the world of cryptocurrency, the risk-free asset is considered to be bitcoin itself due to the following caveat: investment in all forms of altcoin is essentially a long position relative to bitcoin – price changes in the altcoin/USD price can be expressed as the sum of the likelihood of BTC/USD price changes added to the cross-rate for altcoin to BTC.

The idea of diversifying a portfolio of investments is an age-old wisdom in the world of investment – be it stocks or commodities. An ill-diversified portfolio centered on a certain entity increases the risk in investment, where the risk of underperformance is compounded as the only way is not downwards in a volatile investment. Cryptocurrency offers a unique proposition in diversification in that its various forms of altcoins act as diversifiers among themselves. With a Bitcoin-centered portfolio, one can increase diversity by holding several different cryptocoins proportionally. However, to a certain extent, diversification between different types of altcoin may not be the best option for a successful investment.

An investment strategy that advocates holding a variety of investments aimed at maximizing the chances of seeking a positive return is what’s known as diversification. This can be achieved either through holding on to a mix of different asset classes or through investing in different types of altcoins within the cryptocurrency market.

3.3. Volatility and Market Risks

When discussing risk and return of an asset, it is important to assess the fundamental, market, inflation, and liquidity risks before determining the potential return. When investing in cryptocurrency, the only way to assess its fundamental value is to analyze the underlying technology and its capability to solve a certain problem within a given market. Most investors fail to do this, leading to the assertion that most cryptos are overvalued. If the investor does determine a value, due to the infancy of the crypto market, there may exist huge disparities between the market price and the actual price, leading to more risk given that it is more difficult to enter the market through high bid-offer spreads. High volatility in cryptocurrency prices presents the potential for high returns, although due to its relative infancy and low acceptance, there is still a strong possibility of losses. Volatility of an individual cryptocurrency can also spill over into the entire market of cryptocurrencies, increasing opportunity costs of alternative investment if it decreases the total expected ROI of the crypto market. Though still relatively untested, it is likely that opportunity costs of alternative investment into other assets will become a factor in the cryptocurrency market given its strong correlation with stock markets. Opportunity costs will lead to the application of a required rate of return on an investment into cryptocurrency, with a higher rate decreasing investment into crypto.

3.4. Security and Fraud Risks

The pseudo-anonymous nature of cryptocurrency transactions has led to the untraceable accumulation and cashing out of large sums of money by criminals. This has led some to use cryptocurrencies in order to launder money and avoid law enforcement detection. An infamous example of this is the case of The Silk Road; an ‘Amazon-like’ marketplace where untold amounts of drugs were bought and sold using Bitcoin, and where foul play ultimately led to the arrest and closure of the website’s operator. Although The Silk Road is a clear example of how law enforcement is capable of tracing and convicting criminals even when cryptocurrency is used, the fact that Bitcoin was the primary method of payment for this black market has brought unwanted stigma to cryptocurrency.

Unfortunately, the almost non-traceable nature of cryptocurrencies has led to various types of security and fraud risks. Individuals’ cryptocurrency wallets have been the target of computer hackers, software malware, and phishing scams. In the most severe of cases, such security risks have led to the loss of several million dollars. Given the irreversible nature of most cryptocurrency transactions, there would be no means to recover these funds.

3.5. Regulatory and Legal Risks

The final risk associated with investing in cryptocurrency and that is discussed in this paper is the risk of regulation by governments or the lack thereof. The ever-increasing use and value appreciation of cryptocurrency has led many governments to look into how to regulate it. This is a risk for investors as regulations could restrict the use and flow of particular cryptocurrency. Additionally, more severe regulations could lead to the halt of a cryptocurrency if the issuing company is unable to comply with the set regulations. For example, in 2017, the Chinese government cracked down on cryptocurrency by banning Initial Coin Offerings and a month later stopped trading of Bitcoin on Chinese exchanges. These regulatory actions caused the price of Bitcoin to decrease by 20% in a matter of days. This severe decrease was also amplified by the mainly speculative investment by Chinese retail investors. This news was compounded further when Jamie Dimon, CEO of JPMorgan, called Bitcoin a fraud. This series of events led to a large decrease in the overall value of cryptocurrency worldwide. While not all regulation is bad, it does bring a level of uncertainty to the future of many cryptocurrency types. On the flip side, the lack of regulation can also pose a risk to investors. Due to the decentralized nature of cryptocurrency, many coin offerings are targeted to individuals worldwide. This is an appeal in that it allows for anyone from any country to invest, however, this attempt to bypass regulations can lead to legal issues with certain governments. An example of this is the ongoing legal battle between the United States Securities and Exchange Commission and Canadian social media company Kik Interactive regarding their 100 million dollar unregistered coin offering. A total lack of regulation has also led to much fraudulent and scamming activity in the cryptocurrency world. The abundance of different cryptocurrency types and Initial Coin Offerings makes it difficult at times to distinguish between legitimate offerings and quick money grab by scammers. This is a risk to investor funds as seen with numerous exit scams and quick disappearances of ill-intentioned offerings.

4. Future Outlook of Top Cryptocurrency

Bitcoin can expect to face similar resistance to change. This is because while a public ledger is great for transparency and tracking, it is a privacy nightmare for banks whose clients will demand that their transactions are not made public. The ability for increased micropayments and smarter contracts is an aspect of the technology that may be worked on separately, with the bitcoin taken as a given and then converted into a sidechain; a layer of technology that will run parallel to the existing network.

Cryptocurrencies are likely to gain traction over the next couple of years, with many opportunities and challenges presented. First, the well-established players can expect to face increasing resistance to change from those with a vested interest in the currency system. This is because making any major changes to the global currency system is a huge risk for the organizations involved. If something were to go wrong with a new system, the results could potentially be catastrophic. It is likely that major global organizations and governments will turn to similar intranet technologies, an example being the Sony and Microsoft-developed .NET platform, as a way to integrate a variety of systems while maintaining the security of separate systems.

4.1. Emerging Trends and Innovations

The future of top cryptocurrencies will be defined by the emergence of new trends as the current trend of homogenization, then inevitable divergence influences various currencies. Until now, the exchange of new crypto for established currencies has largely been about Satoshi-fied (infinitesimally small) exchange rates; in the future we are likely to see the same kind of price stability graphs that measure a given currency against the dollar. The stability of exchange rates is likely to vary, with currencies pegged to existing state money being at one extreme (and possibly even centralized) and currencies with built-in exchange facilitation at the other. Coins pegged to other assets (such as Namecoin which is pegged to data storage) will make it easier for people to diversify their savings just as an investment in a foreign currency or a foreign bond does today. A large grey area in between on direct exchange to fiat will still exist with entrepreneurs and investors trying to read in between the lines of relevant regulations and find loopholes in competitors’ implementations. The next innovation is one that could change the nature of cryptocurrency itself. Interest-bearing payment systems. Interest has always been a method to coax a population into taking loans, and now that there are ways to automatically issue arbitrarily small loans and pay any interest rate, some form of loan is looking inevitable in a deflationary economic system. This is a stark contrast from the mostly HODL-based culture of most cryptocurrencies today where the idea of spending money has an almost philanthropic rationale. Although controversial from some to most as debt and spending money one doesn’t have are generally bad habits, others see it as a stepping stone to the killer app of prediction markets and also a shift from decisions being based on present-biased preferences to more of a consideration of the future and its uncertainty. Inflationary payment cryptocurrencies would also have the possibility of someday implementing similar systems.

4.2. Adoption and Integration into Mainstream Finance

To date, cryptocurrency’s primary use case has been investment or speculation on the value of the tokens. With the advent of utility tokens and avoiding the ICO craze, a number of firms are foraying into using cryptocurrency as a cheaper means to transfer value between different fiat currencies. This can be a boon for people in developed countries who are travelling and don’t want to deal with the hassle of forex rates. However, this is an even larger benefit for those in underdeveloped nations who have no functional banking system, and perhaps still deal in cash and with very high forex rates when sending money internationally. An example would be migrant workers who send remittances to their families back home; many times the amount of money sent can be ravaged by fees. For example, Western Union has built a business on money transfer between different fiat currencies; in 2016 they made a revenue of over $1bn on $80bn of remittances. The global nature of cryptocurrency allows for significantly cheaper cross-border transfer of value and thus can create great change in this field. It’s already very common for people working in developed nations to send money to their families in underdeveloped nations; thus there is a huge latent demand for this service that will be unlocked as cryptocurrency begins to play a larger role in the investment and development bank. This specific use case of cryptocurrency is still very nascent and has issues with price stability due to the speculative nature of the assets, but in the future, it would not be surprising if there were a cryptocurrency designed specifically for remittances between say, USD and Nigerian Naira. This would also tie into the next topic of “cryptocurrency as a stable medium of value” but will discuss that in its own section.

4.3. Challenges and Opportunities

Another great opportunity is the technology behind cryptocurrency itself, which is the blockchain. It is a distributed ledger used to record transactions across multiple computers. It is more secure and cost-efficient. There are many companies from different industries that have already started to adopt this technology because they see it as a new and improved way of handling transactions. The demand for blockchain technology is high, and the price to implement it is also quite expensive compared to the conventional method. This can also increase the demand for any type of cryptocurrency because the blockchain technology is still considered as the backbone of any cryptocurrency.

There are still some opportunities that cryptocurrency can achieve in the future. One of the most discussed opportunities is to be an alternative to the current fiat currency. If this can be achieved, the demand and the price of any type of cryptocurrency will greatly increase in the future. It is because the worth of any cryptocurrency is still determined by its comparison to any other type of fiat currency. If the fiat currency collapses, cryptocurrency is the only viable replacement. This can also be an indirect way of achieving price stability of any cryptocurrency. Demand and price stability can lead to better implementation of any cryptocurrency to any merchants and as a method of payment.

One of the major challenges for different types of cryptocurrency is its implementation. Since cryptocurrency is still considered a new technology, most people and merchants are still not ready to accept it as a method of payment. There are lots of people who still don’t understand how cryptocurrency works, and this situation gets worse when the price of Bitcoin drops drastically after reaching its all-time high. People who bought Bitcoin at a higher price will not be willing to spend it on something that they believe will cost them more in the future. This can be seen when Steam, one of the largest gaming companies, stopped accepting Bitcoin as a method of payment due to high fees. The price of Bitcoin is too volatile, and the fees for the transactions have increased, making it unsuitable for processing such payments. This situation can also be seen with merchants that have accepted cryptocurrency as a method of payment. Some merchants had already accepted cryptocurrency long before this situation happened. Although it is beneficial to them, the risk of losing some of the income that they have earned due to price volatility is still a big concern. The price of any product in cryptocurrency can be directly affected by the cryptocurrency price. If the cryptocurrency price drops, the cost of the product will be much cheaper than it should be. This will cause a loss for the merchants because they will have to spend more to restock the product but only get a little amount of money in return.