Shaping the Future of Crypto

Given the ongoing market crisis, predicting how the bitcoin sector will develop over the next decade may appear impossible. Crypto skeptics, enthusiasts, and experts give a wide range of perspectives on the nascent industry, from pessimistic predictions to betting on a golden future. The sweet spot would be purchasing bitcoin for learning and experimenting without anticipating a significant return. The regulatory route for cryptocurrency is still fraught with uncertainties. Concerned about a lack of cryptocurrency regulation, the Securities and Exchange Commission has not yet permitted mutual funds or exchange-traded funds to invest directly in Bitcoin.

Aside from directly acquiring the digital tokens, current solutions for cryptocurrency investors include mutual funds and ETFs that own Bitcoin futures or invest in firms that hold Bitcoin. Smart regulation that protects consumers could enhance confidence in the crypto sector. The fact that the SEC and the Commodity Futures Trading Commission have yet to intervene to prevent the spread of these types of assets “shows they’re willing to let these kinds of technologies evolve and iterate” before clamping down.

Scalability Is a Problem

In the medium term, ensuring scalability is a critical technological problem for the crypto sector. Several cryptocurrencies and platforms have proven to be successful as proof of concept; however, “they haven’t always been able to deliver at scale.”

This year, Ethereum wants to transition to a separate proof-of-stake blockchain; this should reduce the computer power required to validate a transaction. There’s also a lot to figure out about how digital currencies might compete with Visa and Mastercard in terms of transaction speed. Cryptocurrencies will likely merge with existing financial players rather than replace them during the next five to ten years; though this could happen sooner. Moreover, cryptocurrency returns have no analogs to typical risk factors in the stock and bond worlds. The patterns of market returns in aggregate defy normal market dynamics. The decentralized architecture of cryptocurrency “creates significant obstacles to real-world use cases.”