It has been a decade since 2009 when the first cryptocurrency Bitcoin was launched after a huge financial blow, ‘‘the global financial crisis’’ in 2007. The idea was to create a free market that aims at benefitting the investors and participants without any regulations, geographical barriers, or taxes. The years followed with mixed reactions from investors and governments globally. While governments certainly did not (still do not) approve of it citing security issues and a threat to sovereignty, the cryptocurrency market kept growing steadily.
The major areas of concerns
While things are changing for cryptocurrencies, markets and blockchain in general, there are some major concerns (majorly myths) that need attention.
- Volatility: One of the major misconceptions that surface due to volatility is the lack of ‘trust’ in cryptocurrency and its markets. Yes, crypto markets are highly volatile investment options. The rise of the crypto market in 2017 (almost 4000%) saw a steep decline in 2018, with almost 78% of the market crashing in the latter half of the year. But volatility cannot be correlated to its ‘credibility.’ Investors must understand that it is a relatively new technology and will take time to settle. For example, the dot com boom was a huge bubble at one time, but today the Internet is omnipresent and is an integral part of lives.
- Crypto Currencies have no intrinsic value: The value of an entity is subjected to its demand. If a larger group of people deem it valuable, there will be a greater demand. Its use cases back the intrinsic value of an asset. For example, gold holds an intrinsic value due to the perception that it is valuable. Whereas Bitcoin, although intangible, has actual uses. The value of Bitcoin is in its utility, adoption, and accessibility.
- Cryptocurrencies are used for illegitimate activities: One of the major reasons for crypto’s rejection is that it’s used for illicit activities. If someone uses technology with bad intent, whose fault is it? The person’s or the technology’s? Just because some negative elements misuse it, we can’t reject the revolutionary offerings of the technology entirely.
Overall, it has been a rough decade for the technology, but with its fair share of vicissitudes, the crypto market has displayed tremendous potential in the last couple of years. Bitcoin and other equally strong coins have proved their mettle. Not only has it attracted investors but also forced governments to rethink their role in participating in this fast-paced economic revolution. The year 2017 saw an astronomical crypto rise with some major coins rising multifold. Ripple alone managed 28,963% profits on returns in this period, while top-performing stocks (that of Zimbabwe) managed a 117% rise. Ripple was still second on the list with Bitcoin leading as No.1 in 2017 crypto charts. According to a report by Cointelegraph, 2017 changed the game in favor of crypto markets, leaving even the highest performing stocks in the dust.
The unprecedented results from 2017 resulted in a paradigm shift of sentiments with more and more organizations and governments bidding to invest in this revolutionary marketspace. However, investors often confuse investing in crypto markets with traditional trading platforms and bear losses. How much ever-appealing it may be, investors must educate themselves regarding the differences and pros and cons of investing in the crypto market.
Crypto Market vs. Stocks Market vs. Forex Market
What makes them different from each other?
- The Value: When someone invests in the stock markets, they are investing in the company, whereas in crypto markets, one invests in the technology/currency. One never really owns any fraction of the company.
- Manipulation: The high volatility of crypto markets often causes a fluctuating evaluation. While market manipulation does not prevail in the stocks market, in crypto markets, it certainly does. Crypto markets are famous for sudden highs and lows, and this affects the market capitalization. While some see it as a downside to investments, others believe that this factor is beneficial for wider acceptance and involves more people.
- Predictability: While it is difficult to make trend predictions in traditional markets, the crypto market is relatively predictable. The rise and fall of currencies are often tied to each other. This gives investors an added advantage. With some experience in the crypto world, it gets simpler to identify the grey areas and positive ones. Nevertheless, this is not all when it comes to these two very distinct trading platforms. Stock markets and crypto trading have some similarities to ponder as well.
- Functioning: Both markets essentially function in a similar fashion. The prices of both are based on demand and supply. In short, how much are the investors willing to pay? When someone pays more than the previous one, the prices go up, and when someone is willing to settle for less, the prices go down.
- Both are backed by an idea: While traditional stocks are backed by the business behind them, cryptocurrencies are based on an idea (detailed in the manifesto or whitepaper).
- Valued against fiat: So far, both the markets are valued against fiat currencies. While the objective of the crypto market is to free itself from the reins of fiat currencies, it is still a long journey.
Another major trading platform often compared with crypto the market is the Foreign Exchange or Forex. While many argue that Forex is very different from exchanging cryptocurrencies, they are actually quite similar.
- Both represent digital value store and easy access: According to experts, both forex and crypto represent a digital store value and are relatively easier to buy or sell.
- Both are highly volatile: It takes a well-informed and experienced trader to deal with the fluctuations in both these markets. Volatility in both the markets, if addressed rationally, results in quick profits that span long or short terms.
- Global reach: What makes both markets the favorite choice of traders is the global outreach both these markets have. The major difference, however, is the nature in which both these markets function. While crypto markets started and gained momentum via global retail, institutional players often back forex.
- A centralized government backs Forex: Though forex is the largest, most decentralized liquidated market in the world, it is still influenced by political announcements, inflation, and employment records. Crypto, on the other hand, is decentralized and works through distributed ledgers that serve as public financial transaction databases.
- Supply: The world’s global financial institutions support forex markets and thus have an unlimited supply of currencies to trade. Whereas, crypto’s limited supply increases demands and thus results in higher profits.
- High liquidity vs. Massive profits: Number of Forex participants are more than any other platform. It is quick and simple to trade massive volumes of currencies on this platform that cannot be influenced by individual players. The crypto market thrives on rewards incurred. For example, an investment in BTC in 2013 would cost investors US$1000 and could be worth US$400000 in less than 5 years.
While both markets are volatile and involve higher risks, they both have the potential to offer higher rewards in a short span of time.
Crypto Market is a revolutionary idea that proposes the benefits of ‘free’ decentralized markets and is backed by robust peer-peer encrypted distributed networks. With its outreach and objective to create a market for all, experts have come up with another out of the box idea called ‘Virie Market.’ The Virie Market is based on the concept of a decentralized economy that allows users to buy/sell whatever they want to, whenever they want to and from where ever they are, without the fear of being regulated. Overall, the crypto market and currencies are breaking the conventional approach of trading and financial institutions. With initial apprehension, even the business fraternity has started to realize its potential. From major economies of the world like China and Germany to key business players like JP Morgan and Facebook is launching its cryptocurrencies, the year 2019, so far, has seen some monumental inclination towards the crypto world.
It is indeed a positive sign for the future of this remarkable technology.