The Cryptocurrency Revolution is (Eventually) Coming, Say Investors

Fred Wilson, an early investor in Twitter, Kickstarter, and other successful Web 2.0 companies, recently blogged that there are “a lot of complaints” about cryptocurrency right now, but many of those complaints lie in the future. I am hopeful that it will. overcome in a few years. . And he still actively invests in the market.

Regulators are hostile to cryptocurrencies, but many cryptocurrency projects are falling behind and some consumers like Facebook’s Libra earn and spend cryptocurrencies, but the popularity of crypto assets in mobile apps Bitcoin is a censorship-protected digital asset store that can market its ultimate. product

Let’s take a look at the cryptocurrency revolution, how it’s maturing, and why investors are optimistic about its future.

The Bitcoin Blockchain and the Token Era: Phases of Technology Growth

Most technologies have gone through similar growth cycles in terms of adoption and market maturity, and the cryptocurrency and blockchain markets are no exception.

The first phase of the technology life cycle is the research and development phase. While developers are just beginning to explore the possibilities of building a blockchain, many cryptocurrencies are still testing different models such as proof-of-work and proof-of-stake. These cryptocurrencies are not yet ready for the mass market.

The second stage is the ascending stage, where early adopters take advantage of the technology. Speculators may already miss the mark, but many cryptocurrencies are just beginning to achieve product-to-market compatibility with real end users. Stablecoin payments and decentralized applications are beginning to gain popularity among early adopters in key target markets.

The third stage is the maturity stage, where the technology fits into production and markets and is widely adopted. With the impending launch of futures markets and the launch of exchange-traded funds (ETFs), Bitcoin is beginning to enter this phase as an alternative asset class in many ways. However, many other cryptocurrencies are far from mature.

The fourth and final stage is degradation, where the technology is commoditized or substituted.

How mature is the cryptocurrency market?

Different use cases have different levels of maturity.

Futures markets and the launch of exchange traded funds (ETFs) are signs that the bitcoin market is maturing. These instruments give investors easy access to alternative asset classes that are less correlated to traditional stocks, bonds and commodities, making them valuable tools for institutional and individual investors.

Stablecoins also provide consumers with a stable and programmable digital currency. With the volatility associated with Bitcoin and other altcoins over, stability like Facebook Libra will provide the stability consumers need to earn cryptocurrency income and make payments in cryptocurrency in their daily lives.

Cryptocurrency as an institutional tool is starting to move out of the R&D phase. For example, JP Morgan’s JPM coin is designed to create an interbank information network to address weaknesses in information trading practices in foreign mutual banking transactions between banks (such as the interbank market).

Cryptocurrency as a consumer tool is still in its infancy. Many cryptocurrencies are volatile and cannot be used as a substitute for cash or credit cards. Also, very few merchants accept payments in cryptocurrency. It may take years for cryptocurrencies to reach the consumer market and be used as a means of payment.

Investors are betting on the cryptocurrency revolution

There is much work to be done before cryptocurrency becomes mainstream, but it is becoming clear that cryptocurrency will fill a real need in many target markets.

Key barriers to widespread adoption include:

Organizational reform

The United States, the European Union, and many other governments and regulators around the world are highly critical of cryptocurrencies and may restrict their use.

Tax reform

Because the IRS considers cryptocurrencies to be investment assets, it imposes strict requirements on taxpayers to report transactions.

Reliability

Many cryptocurrency projects are still in their early stages, and the field has long been fraught with controversy, dating back to the time of the original founders.

Purity

Many consumers are still unfamiliar with cryptocurrencies, including how to buy, sell and trade them in a real-world environment.

Venture capital investment in cryptocurrency and blockchain startups surpassed $850 million in the first quarter of 2019, up from $2.4 billion in 2018, according to Pitchbook. These figures include the London Stock Exchange, Microsoft Corporation’s key prices. And other multinational companies are also exploring the use of this technology.

Many financial firms see huge opportunities in “tokenizing” traditional assets like stocks and commodities, but technology companies believe blockchain can add its own layers of economics to the network. The value of cryptocurrency brokers, such as Coinbase, which is valued at $8 billion, is also increasing.

Outline

Cryptocurrencies have faced many hurdles over the years, from strict regulations to extreme volatility. Despite these obstacles, many investors believe that the market will grow significantly in the coming quarters as technology improves in many end markets and is performing as expected.

The IRS recently released its first crypto-specific guidance since 2014 on October 9, including the 2019-24 Revenue Code and FAQs. These papers discuss everything from how to deal with hard forks to calculating capital gains and losses. A recent blog post dedicated to this topic describes some key findings.