Cryptocurrency market. What is happening now and what to expect
Since April 2019, an activity has increased on the cryptocurrency market, prompting the resumption of upward dynamics in significant cryptocurrencies. Thus, the cryptocurrency market actually indicated the end of the decline period, which was traced for more than a year.
The reason for the resumption of demand for cryptocurrency became political and trade risks. More information about the dependence of Bitcoin cost and risks you can find in the article “Cryptocurrencies as new safe haven assets”, where patterns and drivers for movement in the cryptocurrency market were discussed.
This article focuses on the problems of the cryptocurrency market and their prospects that are emerging at the current time.
Let’s try to highlight the main problems of the cryptocurrency market
- Low practical value of the cryptocurrency
Despite significant attempts to popularize cryptocurrency in everyday life and the wide possibilities of their use, the share of transactions from the beginning of the year with cryptocurrency to buy or sell goods and services ranged from 1 to 2%. And this is in the period of relative lull in the volatility of the cryptocurrency market, which contributed to a decrease in the speculative component of cryptocurrencies. This was supposed to cause a more active introduction of crypto coins into real life, which is also facilitated by many payment systems.
At the same time, many cryptocurrency holders, in particular Bitcoin (BTC), continued to hold this asset with the hope of restoring its growth. To some extent, this behavior is justified, since those who acquired Bitcoin later than early November 2018 and continue to keep Bitcoin, are now in the black.
Given the risks that have caused the wave of growth of the cryptocurrency market, one can argue about its low practical value. But it is worth noting that in the face of growing risks, investors who are looking for safe assets go away from high volatility. The cryptocurrency market cannot boast of stability.
The main driving force of the cryptocurrency market is the speculative component, which as a result has made Bitcoin and other cryptocurrencies what we have today. Drawing the analogy of the cryptocurrency market with the classic currency market, cryptocurrency and branded products, it turns out that the cryptocurrency market is a kind of branded product for which demand increases as its popularity increases. And this is a normal phenomenon in the market, since the demand is directly proportional to the cost.
But because of its nature, most cryptocurrencies have a limited number of units, which should have caused a steady increase in value with the limitedness of freely mined cryptocurrencies. The peak of the cost of the same Bitcoin fell on the peak of its production.
Summing up, it is possible with a high degree of loyalty to assert that the cryptocurrency market still declares itself. But, because of its nature, it is no longer as loud as it was in 2017. And returning to the fact that we have relatively speculations, volatility and popularity, it is possible that the similar model of the movement of the early 2018 will repeat.