Digital money: Cryptocurrency becomes more institutional, unclear

Positive sentiment in the Crypto room depends on increasing the mainstream adoption, as well as the development of successful technology infrastructure

Cryptocurrency exploded until the last quarter of 2020, and the total Crypto market capitalization reached a highest record. Bitcoin almost three times more than the quarter, followed by many alternative coins ('Altcoin') such as the ethereum which doubled the value, and the trend continued to 2021.

The significant driver for the Rally Crypto has increased institutional interest and developing enthusiasm about DEFI ('Financial Decentralization'), where entrepreneurs in the Crypto industry can re-create standard financial instruments outside the control of the company or the government. The defi industry has evolved from the Ethereum as an initial application for 'Stablecoinin', which is pegged to the Fiat currency such as USD, and for a more advanced solution.

Furthermore, the initial stage of upgrading to Ethereum, ETH 2.0, was launched in December, trying to increase transaction bandwidth in a safer and safer way. The question is whether this driver is strong enough to maintain the Male Crypto market throughout 2021.

Benefits of Decentralization Currency

Fiat money supply is controlled by the government and the central bank through the ability to print money on their will. This has caused many cases of hyperinflation in the past centuries, with the Western Roman Empire giving an early example. With a rapidly growing Empire, the cost for the military, logistics and administration continues to add. To cover the cost of sky-rocketing, the Roman continues to print new coins with lower silver purity, transfer wealth far from the people and devalue the currency. Debasemen coins and hyperinflation produced ultimately contributed to the collapse of the Western Roman empire.

Fear of the devaluation of the monetary system has historically made people look for a barter method that is inefficient, and at a newer time for assets protected by inflation such as gold, and commodities in general. Although Bitcoin is still too volatile called Safe Haven, the nature of the cryptocurrency decentralization attracts investors in hedging in inflation, as shown in 2018 when Venezuela experienced one of its worst periods since World War II. With the Bitcoin supply limited 21 million BTC when all Bitcoin is mined, it has properties similar to some rare commodities such as gold. By using this analogy, Bitcoin can be seen as a financial option to the collapse of the current monetary system, or at least in the fact that the world of Fiat will decrease faster than the decentralized cryptocurrency due to the difficulty of recording a decentralized system.

Fix the ethereum obstacles

With the limited supply of Bitcoin and great energy costs associated with verifying transactions through mining, Bitcoin is considered more is a value storage than other crypto such as Ethereum. Ethereum also has industrial applications, such as silver in the commodity room where around 50 percent of the supply enters industrial applications. Ethereum networks allow smart contracts - pre-program transactions that run automatically when certain conditions are fulfilled, as long as the transaction costs needed are paid on the network. This smart contract has extensive applications outside the financial industry, such as in recording property ownership, processing insurance claims or managing a voting system.

Fix the ethereum obstacles

With the limited supply of Bitcoin and great energy costs associated with verifying transactions through mining, Bitcoin is considered more is a value storage than other crypto such as Ethereum. Ethereum also has industrial applications, such as silver in the commodity room where around 50 percent of the supply enters industrial applications. Ethereum networks allow smart contracts - pre-program transactions that run automatically when certain conditions are fulfilled, as long as the transaction costs needed are paid on the network. This smart contract has extensive applications outside the financial industry, such as in recording property ownership, processing insurance claims or managing a voting system.

The broad spectrum of applications is currently very limited, because the Ethereum network only allows processing a small number of transactions per second. This results in large transaction costs because participants compete for bandwidth, so that the increase in ETH 2.0 is very important for developing networks. The user's volume on the Ethereum network, measured by the number of unique active addresses, is still far from peak activity at the end of 2017, in contrast to Bitcoin where the number of addresses actively reaches new highs.

Apart from significantly increasing bandwidth, the UTH 2.0 upgrade will move the verification process from energy intensive miners, which do not need to have investments in themselves. Replacement will be a battle framework where ET holders can decide to risk part of their own ET and participate in the validation process. By doing that, they will receive gifts with new ETH issued, but lose some of their shares if they are in whatever way tries to change the transaction. Continuous flow of new publishing makes ETH inflation naturally and long-term holders who are not actively participating in risking will experience a leak. The overall goal of Ethereum is to maintain inflation at a fairly low level to have enough validators and thus maintain a secure network.

According to Money-movers.info, the value completed every day on the Ethereum Network beyond the Bitcoin network in September, indicating the use of wise ethics with BTC. However, Bitcoin reclaims the advantage of nearing the end of the year, expressing red-hot flowers for investors to participate in BTC Bull Run and the impact of high ET costs.

Use crypto exposure analogously with the option

In the current financial market, investors must seek equity equity and instruments related to achieving positive returns. Although Crypto investors in 2020 are likely to get a big profit, large volatility in Cryptocurrency requires caution when trading. This was exemplified in mid-March last year where BTC and ET lost half of their value during the day when the market panicked in an increase in the number of Covid-19 global infections. Apart from being a fence on inflation, investment in the Crypto industry can be seen the same as adding options for your portfolio as a bet, which has a probability reduced to zero value or to provide many fold returns.

Looking for 2021 and passing speculative investors, positive sentiment in the Crypto space depends on increasing the mainstream adoption, as well as the success of the development of technology infrastructure to compensate for increasing network demands. At the same time, the threat of regulatory and hackers challenges that found the backdoor still hiding on the horizon.

In 2020, Cryptocurrency began to move because it was not clear to be institutional. These two things that encourage this: the opportunity to force 3 to 5 percent of your portfolio on something that can provide a lot of return, and crazy fiat money circulating. The younger generation, and now more and more money managers, are willing to bet that technology will be longer than money without a guarantee value.

Anders Nysteen is a quantitative senior analyst at Saxo Bank

source : gulfbusiness.com