Will Cryptocurrency Survive?

Cryptocurrencies have seen explosive growth in recent years but what does this mean for their future? Read our expert analysis on whether cryptocurrency will survive.

Will Cryptocurrency Survive?

Cryptocurrencies have seen a surge in popularity in recent years, with both retail and institutional investors taking an interest in the asset class. According to Coinbase, the world's largest cryptocurrency exchange, retail and institutional investors each accounted for around 50% of its platform's assets in the fourth quarter. However, a report by the National Bureau of Economic Research (NBER) found that 10,000 bitcoin investors, both individuals and entities, control about one-third of the bitcoin market, and that 1000 investors own approximately 3 million bitcoin tokens. The U.

S. Federal Reserve, Treasury Department and International Financial Stability Board have identified stablecoins (digital tokens linked to the value of traditional assets) as a potential threat to financial stability. Stablecoins are mainly used to facilitate the trading of other digital assets, but they are backed by assets that may lose value or become illiquid in times of market stress. This could lead to a loss of investor confidence, particularly during times of market stress.

The fortunes of more companies are now tied to the performance of crypto assets and traditional financial institutions are venturing deeper into the asset class. This has led to new risks emerging, such as banks stumbling upon crypto derivatives and unhedged crypto exposures due to a lack of historical price data. Regulators are divided on the size of the threat posed by a fall in cryptocurrencies to the financial system and the broader economy. Manhattan prosecutors recently charged a former product manager at OpenSea, the largest online marketplace for non-fungible tokens, with insider trading - the first case of its kind involving digital assets. This highlights the need for investors to be aware of potential risks when investing in cryptocurrencies. Cryptocurrencies aren't really reliable at all.

They still rely on the underlying infrastructure that powers cryptocurrencies such as Bitcoin, much of which is in China. Theoretically, the Chinese government could make changes to cryptocurrencies at a fundamental level by imposing its will on the data miners who keep them running. Investors can now add cryptocurrencies to their portfolio directly from their existing brokerage account. This makes it easier for investors to access digital assets without having to learn how to navigate a cryptocurrency exchange. Former Commissioner of the Securities and Exchange Commission and financial systems expert Professor Grundfest has commented on the future of cryptocurrencies.

He points out that although the global cryptocurrency market has been convulsed in recent days, Bitcoin has managed to remain stable.