Cryptos are Still in Infancy
Cryptocurrencies have received much media attention over the years. Despite this, the market size is still tiny compared to fiat and Gold. The bitcoin market at its peak was only about $1 trillion. On the other hand, Gold was at $7.9 trillion, while the U.S. stock market was $28 trillion.
This small scale of the market means that minor influences can have a more significant price impact. If an investor group decides to sell 500 million dollars in Gold, the price of Gold will hardly waver. It is enough to disrupt the entire market and crash the price if the same happened with Bitcoin.
However, the development of the cryptocurrency sector also implies that new and innovative ideas are yet to come.
Cryptocurrencies Are Highly Volatile
The cryptocurrency market is known for its wild price swings. Stability does not apply only to cryptocurrency but to all currencies out there. To be used as a trusted exchange medium, the change in price day in day out should be minimal.
Since cryptocurrencies are quite the opposite of this, watchdogs are pretty skeptical. People are yet to accept crypto as real money because they fear that they could lose value overnight.
That’s not all. Due to the unpredictable prices, regular money services such as currency conversion, ATMs, and remittances are pretty hard. Businesses will have to hedge their risks by charging very high fees.
In turn, this defeats the original purpose of cryptocurrencies. It entails a cheaper and more flexible payment method. Until cryptocurrencies are more stable, watchdogs will not be advancing promotion.
Buy Today, Sell Tomorrow
When the crypto bubble grew in 2017, several financial consultants urged their clientele to place bets on Bitcoin and others. However, by the end of 2018, most of the more prominent brokering companies began to ban the trading of cryptocurrencies and deem them excessively speculative. This move pulled potential investors off the expected crypto market.
It does not provide comfort that bitcoin could protect against inflation in ten years if you risk losing out today. Many crypto buyers continue to buy coins for short-term speculation, thus jeopardizing the stability of market prices.
Crimes Related to Crypto are Still at Large
The value of cryptocurrencies keeps on soaring. In turn, officials face a significant challenge in eliminating their use in online fraud and money laundering.
Fraud, followed by theft and ransomware, was the primary cryptocurrency crime in 2020. Half or around $129 million of all theft hacks, which are operations on platforms that promote lending outside of banks, were hacks linked to decentralized finance (DeFi).
Losses from cryptocurrency theft, hackers, and fraud dropped 57 percent to $1.9 billion last year, as market players enhanced security mechanisms, but crime increases in decentralized finance. Centralized fraud regimes face regulation and enforcement, which drive fraudsters to use decentralized financial services.
The renewed scrutiny and interest of cryptocurrencies, as institutional investors, entered digital assets, pushing them this month to new all-time highs.
The government is working to identify the available digital currencies and how to tax and govern them. Until clear guidelines and regulations happen seamlessly, watchdogs promoting cryptos are unlikely.
Patience is Key
Besides the whims of the market, most cryptocurrencies have no direction, so it’s not clear where they will end up. Nonetheless, a few noteworthy coins have invested in tactics that push them in a particular direction.
Even though it seems appropriate to market cryptos because of their high price, waiting is necessary. A currency needs time to grow and move up with the people. Cryptocurrencies need to stabilize first before being used comfortably as a store of value and for day-to-day payments.
The world has changed and is still changing swiftly. The speed at which cryptocurrencies are taking over indicates that traditional financial institutions can no longer keep up. Similarly, in the pursuit of total social and financial inclusion, the world faces an increasing need to tear down boundaries – this technology has all it needs to meet these concerns.
It is only about time until these cryptos find a way into our lives and shape them more effectively, taking account of economic growth and inclusivity. Meanwhile, watchdogs will be watching and solving crypto-related issues where possible.
Watchdogs are pretty hesitant when it comes to cryptocurrencies. It may continue for a while until more growth and maturity improve in the cryptocurrency space. First, cryptos are still young and highly volatile. They are also associated with crime, which different bodies worldwide are trying to tackle.
Also, the fact that most people buy them for-profit and not store of value for the future. Until such issues are addressed and tackled, watchdogs will remain on the sidelines. But, who knows? Maybe in a few years, they might be the ones pioneering crypto marketing for more adoption.