CONTENTWORKS EXCLUSIVE — How are Cryptocurrencies Around the World Faring?

In this Contentworks Agency exclusive, Director Niki delves into the current state of cryptocurrencies around the world.

Cryptocurrency Update: War, NFTs, ETFs, challenges to adoption and top altcoins to watch

When Russia invaded Ukraine at the end of February, Ukrainians began lining up at ATMs. As a result, the nation’s central bank set the withdrawal limit at 100,000 Ukrainian hryvnias per day (approximately $3,400). News of this led to countries around the world sending millions of dollars to help Ukraine. And this funding was in the form of cryptocurrencies. Even charities in the country began to receive crypto contributions.

Cryptocurrencies, by their very nature, are global. To donate fiat currencies, you would need to go through intermediaries and various legacy systems. Not only do digital currencies solve this issue, but crypto transactions can also evade Russia’s attempts to isolate Ukraine. Ironically, Ukraine had become something of a hub for cryptocurrency and Web 3.0 development even before the invasion. In 2021, the nation ranked fourth on the Global Crypto Adoption Index, way ahead of the US. Also, in February 2022, the country’s parliament had passed laws in support of digital assets.

Image Source: Statista

So, what has been driving the rising interest in cryptos? Here’s a look.

Biden’s Executive Order

On March 9, 2022, US President Joe Biden released an executive order, asking the government to evaluate the benefits and risks of digital assets. The executive order called for further investigation into the asset class, diverging from the stringent stance America has so far held on cryptos. The order suggests that the United States “must maintain technological leadership in this rapidly growing space.”

Many analysts believe that this move was spurred by the Russian aggression. Not only does it show solidarity with Ukraine, but cryptocurrencies are also proving to be an effective lever in the fight against Russia. Digital assets might well continue to be a powerful way to deal with future conflicts.

Russian Ruble Plunging

The Russia-Ukraine war led to the Russian ruble plunging to all-time lows against the greenback, though recently it has returned to pre-war levels. The sanctions against the country set further limitations on the wealthy oligarchs and regular citizens in accessing and moving their money. The plummeting of the ruble was followed almost immediately by a significant rise in activity in the crypto markets in Russia.

Trading volumes between cryptos and the ruble rose to 15.3 billion rubles (or $140.7 million) on March 1. This represented a 3x surge from the previous week. In short, even in Russia, people quickly switched to cryptocurrencies when faced with uncertainty regarding the domestic fiat currency.

Image Source: CNBC

The Rise of NFTs and the Metaverse

The latest Global Crypto Adoption Index, published by Finder in January 2022, revealed some surprising crypto facts. For instance, Vietnam ranked first in the world in terms of cryptocurrency ownership at 28.6%, followed closely by India at 23.4%. The UK, Germany and Japan had the lowest crypto ownership. Global crypto adoption rose to 15.5% in 2021, from 11.2% in 2020. The rise of NFTs and the metaverse might have had a role to play in this rise in crypto adoption.

Non-Fungible Tokens or NFTs are altcoins that can be used to buy digital assets, such as art, music, videos, and much more. With NFTs entering the gaming space, they have gained huge popularity. These crypto are now at the heart of the play-to-earn gaming model. They allow gamers to trade and sell NFTs in-game to earn money.

With NFTs, cryptos have become the link between the physical and virtual worlds. They are also the currency of the metaverse. Mark Zuckerberg famously termed the metaverse “the successor of the mobile internet.” The immersive experiences that the metaverse promises have been drawing huge interest. In fact, luxury brands like Gucci, Louis Vuitton and Burberry, among others, have bought into this concept, heralding the era of digital fashion. Institutional interest has also been seen from other sectors. For instance, Walmart is looking at its own cryptocurrency and selling NFTs.

Image Source: Ledger Insights

The Entry of Crypto ETFs

The very first Bitcoin exchange traded fund (ETF), BITO, was launched in October 2021. The ETF broke all records to become one of the most traded ETFs ever, attracting over $1 billion in investments in the first few days alone. By the end of 2021, the ETF market had garnered more than $900 billion. In fact, the number of crypto-tracking investment instruments more than doubled in 2021 to 80, from a mere 35 at the end of 2020. Investment in these instruments rose to $63 billion by the end of 2021, from $24 billion at the beginning of the year.

While all this is great news for crypto enthusiasts, there still are some barriers to overcome before digital assets can become mainstream.

Barriers to Crypto Adoption

Digital assets saw their biggest year in history in 2021, with the likes of El Salvador, Tesla and Microstrategy investing millions in Bitcoin. On the other hand, DeFi projects exploded on the scene, and the metaverse and NFTs saw huge backing from tech giants.

Image Source: CryptoVantage

All this good news is, however, tempered by obstacles that still hamper the adoption of cryptocurrencies. These challenges are much beyond the usual scalability, regulations and transaction time related concerns.

The 51% Cyber Attack

Bitcoin SV, Ethereum Classic and Verge have all experienced the 51% attack. Also known as a majority attack, this is an attack on a blockchain network by an individual or a group of miners who control more than 50% of the network’s hashing power or hashrate (or the total computing power associated with processing transactions and mining on the network).

The good news, however, is that as the network grows and builds more mining nodes, the risk of a 51% attack diminishes. This is because the cost of the attack rises in correlation with the hashrate. So, the larger the network and the more nodes it has, the greater will be the hashing power required to gain control over 50% of the hashrate.

Not Enough Merchants Accepting Cryptos

Although PayPal, Visa and other giants are now offering crypto transactions, real-world merchants accepting crypto as payments are still only few and far between. Merchants could be reticent about upgrading their systems to accept cryptocurrency payments, not just because of the cost involved but also due to a lack of knowledge and fear of cyber threats. Then there are crypto owners who prefer to HODL in hopes of a spike in value, rather than spending altcoins.

User Experience is Still Wanting

Data security breaches, prolonged transaction times and a lack of real anonymity are some of the factors hampering user experience. The only thing that cryptos can actually guarantee is decentralisation. Also, using cryptos is not as user-friendly as the less tech-savvy would want. There’s a lot to learn before one can seamlessly use digital assets, from public and private keys to hard and soft wallets and more. So, developers need to think of ways to increase ease-of-use and seamless user interfaces to spur greater adoption.

Impact on the Environment

The new generation of investors is all about eco-friendly solutions, ESG and sustainability. Unfortunately, mining cryptocurrencies is a resource-intensive process that creates a huge carbon footprint. On May 13, 2021, Elon Musk tweeted that Tesla would no longer allow Bitcoin transactions due to its huge energy consumption. The price of BTC fell 10% the very next day.

Image Source: Twitter

The Proof-of-Work protocol is energy-intensive. At present, Bitcoin mining consumes about 0.5% of the global electricity consumption.

Crypto Performance in 2022 and Beyond

The global crypto market is expected to surpass $3474 million by 2030, from $842.36 million in 2020, at a 30.32% CAGR. Analysts appear optimistic too. Despite Bitcoin hovering around the $40,000 mark through most of March, many expect BTC to cross the $100,000 mark by end-2022. A recent Deutsche Bank study revealed that about 35% of BTC investors believe that Bitcoin price will cross $110,000 over the next 5 years.

But Bitcoin isn’t the only digital currency worth considering. Here are some of the most promising altcoins for 2022 and beyond.

Image Source: Statistics & Data

1. Lucky Block (LBLOCK)

A blockchain-based lottery platform, Lucky Block holds huge potential to significantly improve the lotto experience. It offers investors a chance to earn passive income.

2. Ethereum (ETH)

Its support of smart contracts makes it one of the most promising cryptos. Plus, the Ethereum 2.0 upgrade will improve scalability, which will make it more attractive.

3. Decentraland (LAND)

This is an attractive coin for those looking for exposure to the metaverse. It has gained huge popularity as a virtual world where users can buy land and create avatars.

4. Aave (AAVE)

Many analysts view this as the hottest new crypto in the DeFi space. The protocol helps users borrow and lend digital currencies with ease. Aave automatically sets collateral ratios and interest rates, while offering liquidity pools through smart contracts.

5. Cardano (ADA)

Using a Proof-of-Stake protocol. Cardano offers highly scalable and much greener platform coins based on Proof-of-Work.

6. Axie Infinity (AXIE)

Axie Infinity is one of the most trending virtual gaming worlds where users can complete quests, create avatars and own pets called “Axies.” These pets can be customised and monetised via the Axie Infinity Marketplace that works on NFTs.

7. Polygon (MATIC)

Based on a highly scalable platform, Polygon offers a Layer-2 solution for the Ethereum network. Developers can build apps on Polygon or port apps from Ethereum to gain better speed and lower fees.

8. Avalanche (AVAX)

This innovative platform brings new use cases to cryptos. It uses three blockchain networks to reduce the burden on the network and boost transaction speeds.

9. Curve (CRV)

This is currently the most talked-about crypto for DeFi exposure. It is a decentralised exchange (DEX) that allows easy exchange of stablecoins. It is the second-largest DeFi project, valued at over $14.4 billion.

10. Solana (SOL)

Based on a unique hybrid protocol of Proof-of-Stake and Proof-of-History, Solana offers fast transaction speeds. Its programmer-friendly compatibility is giving Ethereum a run for its money.

Cryptos have proven to be an effective alternative to traditional assets during times of uncertainty. If you are offering crypto trading, it’s time to talk about it. Educate young investors, spread the news and offer valuable market analysis and insights with help from an experienced content creation team at Contentworks. Contact us to learn how we can support for fintech brand.

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Contentworks Agency provides compliance friendly content to banks, forex brokers, fintechs and many other sectors.

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Contentworks Agency provides compliance friendly content to banks, forex brokers, fintechs and many other sectors.