Decrypt: Crypto future still evolving

CHENNAI: Everybody’s talking about the latest trends in crypto, but is it just a phase or is crypto here to stay? Could it even replace fiat currencies?

Crypto investors were nervous when 2022 rolled in. An unsure bitcoin had set the cat amongst the pigeons. Now we all know that the last massive surge in 2017 was followed by an ice bath in 2018, and the leading coins started to trend downward in November 2021. Many experts speculating and predicting the end of the crypto. In fact, the mostly positive market momentum of 2021 was overwhelmed by bearish trends in the first half of 2022. The stock market dipped due to surging inflation, Russia’s invasion of Ukraine, and other macroeconomic challenges. Cryptocurrencies followed suit, falling back rapidly with little or no indication of recovering.

So how does the 2023 calendar appear? I believe that the coming year would answer some important questions so far unanswered, setting the course for cryptocurrencies and their investors for the long run. Although, it’s impossible to say exactly what will happen to the cryptocurrency market in 2023 and beyond. By keeping an eye on a few overarching themes of crypto, we will be able to make better investing decisions as the market continues to evolve.

There are going to be some crucial factors that we should be looking out for. The first would be the Regulatory landscape - in the US and of course in India. The uncertainty and the fluidity in this space needs to take direction, more sooner than later. The mass-market adoption of cryptocurrency payments which presently seems heading north, would also determine the direction, going forward. Exchange-traded funds based on Bitcoin and other digital currencies are also emerging and they would be a key factor as well as we mull over crypto’s future.

Countries adopting Bitcoin (or other digital currencies) as legal tender: the Central African Republic has become the second country in the world to adopt bitcoin as official currency, after El Salvador took the same step last year. Panama has also drafted legislation to make Bitcoin legal tender last year though it has still not moved much on that. Ukraine’s also taking steps in that direction. In Sep. 2021, the country’s parliament adopted a law legalising and regulating cryptocurrency in a nearly unanimous vote. The conflict with Russia might just hasten the process. Paraguay and Panama are also making some moves in this direction.

In one best-case scenario for 2023 and beyond, regulators around the world might come together on a global framework for crypto regulation. However, that looks unlikely today since international views of crypto range from, “Bitcoin is an official currency,” in El Salvador to, “Crypto transactions are illegal,” in China. Global unity on the issue seems unlikely in the short term.

Crypto regulations are moving forward on a federal level, though. In fact, the Biden administration has put together a highly qualified team to steer the cryptocurrency regulation. But it’s early days yet.

Even so, a series of baby steps that started with Bitcoin’s creation in 2009 are likely to continue for many more years.