The year 2021 took cryptocurrencies to unprecedented levels

Challenges promote progress. Technology, like life itself, cannot be static. Only dynamism stimulates positive change. Amid the collapse of the cryptocurrency market in mid-May, Many private and institutional investors began to lose confidence in the bright future of cryptocurrencies in general, and Bitcoin (BTC) in particular.. Companies and institutions, whales and pioneer users came together for a single push: The internet has been overwhelmed by a wave of distrust of “cryptocurrency number one” as the best safe haven, better than gold and everything that was invented before.

You have to see the big picture here to see what’s going on. The last time the market suffered more or less comparable and significant losses was a year ago, in March 2020. This year, panic sales caused by a series of negative events – Elon Musk’s crusade on Twitter against BTC, rumors of the Binance trial, and the Chinese government’s recent crackdown on cryptocurrenciesâ ???? They are reminiscent of the tremendous collapse of digital assets, which peaked in December 2017, and the “crypto winter” that followed.

However, many people who have little knowledge of how the cryptocurrency market works fail to realize the depth of the changes the space has gone through in recent years. Emotions are an investor or trader’s worst enemy in a rapidly growing digital asset ecosystem. It pays to look at the facts soberly and analyze the changes to understand the true value of the ecosystems that grow on the fertile soil of the blockchain.

The wind of change

The year 2021 took cryptocurrencies to unprecedented levels
The year 2021 took cryptocurrencies to unprecedented levels

Investment awareness has changed in recent years. While it is still dominated by a highly speculative component, there is also a practical use for settlement. Investors have moved from short-term speculation to long-term gambling. The number of Bitcoin ATMs has doubled since 2020. This spectacular increase clearly shows a growing demand for the world’s largest crypto assets. From a niche, the cryptocurrency industry has grown into a multi-billion dollar industry.

Stablecoins – tokens associated with their corresponding fiat asset such as the US dollar, euro, etc. – have gained significantly in weight over the 2020-2021 period. For example, With the advent of new platforms known as Decentralized Financial Protocols or DeFi, opportunities arose to provide risk-free benefits from core assets. These platforms are nothing more than distributed programs that provide clearing, custody and settlement services. Every year they take a bigger piece of the pie from traditional financial institutions. The increase in activity in the area of ​​decentralized trading platforms has also occurred because they do not have the same common weaknesses as centralized trading platforms in their infrastructure.

Decentralized exchanges outperform centralized exchanges in terms of trading volume, demonstrate a 1,000-fold growth in trading volume in the last year alone. The interfaces for interacting with DeFi can be created by any programmer anywhere in the world, and the essence of this interaction is the development of a financial ecosystem that works on the global blockchain. For the moment, DeFi’s market cap has surpassed $ 100 billion, and this trend is no doubt set to continue soon.

Speaking of examples, we can outline that even large companies like Deutsche Telekom have given up private blockchains and are studying public infrastructure, supporting nodes in networks like Ethereum, Solana, Algorand, Celo, etc. This fact suggests that The world of decentralized finance is gaining traction in the global clearing, custody and settlement services marketLike Bitcoin, it had secured safe haven status and ousted gold from its throne.

We saw that Business demand accelerated as real dollar deposit rates turned negative (central bank rate minus inflation). Inflation expectations tightened over the past year and boosted demand for long-term capital preservation. Today, Bitcoin has successfully captured the hearts and minds of not just speculators and hedge funds who recognize the inevitability of dollar balances being devalued, vote with their money, and transfer some of the Treasury’s liquidity to digital assets.

There are still challenges

In the meantime, Divergences in the regulatory approach persist. Some jurisdictions have drafted laws, but they have no practical application. At the same time, other countries are only at the beginning of the process of creating regulations and some have banned the use of cryptocurrencies: China’s recent stance is an example of this.

In the US, for example, banks were allowed to offer cryptocurrency asset custody services. Emerging economies in countries like China, Russia and India remain on the sidelines, waiting for what is presented, remaining in uncertainty and trying to propagate something at the state level, offering potential investors the so-called “technological sweets”. Unfortunately, in practice, all projects that come worldwide are often moved to other jurisdictions, which is very sad.

The future of the cryptocurrency sector is undoubtedly optimistic. Each phase of “cleaning up” and dumping the price counterweights, correcting and falling, should be viewed as another round of evolution. In the near future, Investors can be expected to shift their attention from careful market surveillance, increased promotion of coins (which have no value to the community), and the expectation of new price records, to building products in growth areas. The cryptocurrency sphere is waiting for the appearance of more comfortable, reliable, and accessible interfaces for conventional investors interacting with the digital asset market, as well as Generation 3.0 blockchains, which will be highly competitive in the next few years.

This article does not provide investment advice or recommendations. All investing and trading involves risk and readers should do their own research when making a decision.

The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.

Gregory Klumov is an expert in stablecoins, whose ideas and opinions appear regularly in numerous international publications. He is the founder and CEO of Stasis, a technology provider that issues the most widely used euro-backed stablecoins with a high level of transparency in the digital asset industry.

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