This article should be preceded by saying that nobody can predict the future. That’s why there’s so much money going into AI right now – if somebody could predict the future of a market, they would be rich beyond belief. Despite that, many incredibly smart people have done their due diligence and have decided that cryptocurrencies make great investments. Before you invest in anything, make sure you do your own due diligence (which you’re already starting by reading this article).
In short, people are highly optimistic about the future of cryptocurrencies. Bitcoin and other currencies like Ethereum are smack-bang in the middle of a long bullish run that is poised to make a huge mark on the future of crypto. But why is this really different from others? And what can be learnt from it about the future of cryptocurrencies in general?
Lessons from the Past
In 2017, there was a huge spike in Bitcoin and other currencies. People rushed into it and eventually came off sore as it crashed afterward. This surge was created by millions of individual investors getting excited about their potential profits and selling when they had achieved those profits. Individual traders commonly don’t invest based on a long-term strategy, more to make a quick buck. As a result, as the price went up, many people sold their coins, causing a crash.
Is this applicable today?
Ask JP Morgan, or Fidelity Investments, or PayPal, or Elon Musk, and Tesla. The rally that has been going since November 2020 has not been driven by individuals like in 2017. It has been driven by huge players like Tesla investing billions of dollars into the currency. Companies like JP Morgan would approach Bitcoin with a long-term strategy. When institutional investors get involved, there is a certain amount of assumed due diligence into the long-term benefits of crypto, which suggests that the future of crypto will be more stable and more profitable.
Fluctuations and Cryptocurrencies
Traditional currencies are regulated by a central bank, which issues money and bonds to banks in an attempt to meet demand and keep the value of the currency stable. Cryptocurrencies are decentralized; their value is driven by the people, by the markets. As a result, they are highly volatile. The institutional investors mentioned earlier are investing in Bitcoin for long-term growth, but it will still have huge ups and downs. These ups and downs mean day-traders will continue to be attracted to cryptos, especially as their growth minimizes the risks. Crypto trading signals help individual investors ride these waves, so even though the future of crypto will likely have more institutional involvement, it will also have more individual involvement.
Many people are putting their money into cryptos because they are following the institutions. This makes a lot of sense, but investors should be careful, especially with smaller currencies like Dogecoin. There is a risk of a 51% attack in crypto, essentially when majority control is gained from a mining organization that can control more than 50% of a mining hash rate, preventing new transactions from being confirmed and causing a complete halt in production.