7 Big Challenges Cryptocurrency Will Face in 2021

0

With a jump in institutional adoption, the crypto market has experienced significant growth in 2020. The leading financial firms worldwide who wish to diversify their investment portfolios have started to invest in cryptocurrency.

Bitcoin, the most prominent cryptocurrency globally, experienced a three hundred percent growth in its gains in 2020. It also breached the twenty thousand dollar level. Simultaneously, ethereum and other cryptocurrencies have also experienced significant growth in their gains.

In 2021, the entire cryptocurrency market cap jumped above one trillion dollars for the first time in history. Moreover, ethereum experienced a jump in its gains by one hundred percent. The Defi tokens also positively contributed to the growth of the crypto market cap.

Many researchers believe that the recent growth in the crypto market’s gains is mainly because of institutional adoption.  Check out sfexaminer.com to know more about the challenges and benefits of investing in bitcoin.

Despite such good growth, the crypto market might face certain challenges this year.

Source: A privacy blog – Incognito.org

Significant Increase In Anonymous Transactions

People have reported numerous unidentified crypto transactions done by ethereum and bitcoin whales. These whales move a large amount of cryptocurrency from one wallet to another to create a supply shortage. In turn, it increases the market value of the coins, thereby helping the whales make huge profits.

The recent jump in ethereum and bitcoin gains is a perfect example of this. With this jump, BTC and ETH supply in the wallet reached the lowest levels in years.

Speculative Traders Are Unaware Of Advantages Of Trading Bitcoins

The year 2021 might witness a surge in speculative crypto trading. The finance magnates think that many speculative traders are unaware of trading bitcoins’ long-term impacts. Instead, they opt to trade coins that provide short term gains.

The traders should instead look into the origins of Bitcoins and research about it. It will help them understand the vision of this digital asset.

Uncertain Regulatory Environment

2021 is believed to witness numerous global crypto regulations. America’s treasury department has proposed forming the crypto wallet KYC rule. It will ensure that the digital exchanges, especially the ones that are US-based, verify the wallet owners’ identity before allowing them to make a transaction of more than three thousand dollars.

The treasury department is yet to put this rule into action. However, it might come into effect within two to three months. This rule will determine how crypto transactions will occur in the US and how the country is planning to treat the cryptocurrency market.

The government authorities are supporting the central bank digital cryptocurrencies. However, they are skeptical about private cryptocurrencies.

As per a bill passed in the Indian Parliament, private cryptocurrencies will get banned in the country soon. The haphazard regulatory system of the cryptocurrencies in the world will have adverse effects on the crypto market’s growth.

The crypto market might have to face numerous barriers because of the uncertain regulatory system. The government might also take steps against the citizens who buy these coins but do not declare them in their financial documents.

Source: Invest In Blockchain

Lack Of Proper Knowledge

There is a lack of knowledge among the traders about the working of financial markets and digital assets. Education is one of the most important aspects of crypto trading as these digital coins are considered the most complex investments of all time.

The crypto market is still in its infancy, and it is one of the best times to invest in cryptocurrencies. However, the educational barrier is preventing people from investing in it. Also, it is one of the biggest obstacles that this market is currently facing.

There is not much information available about how this market works. Also, people are unaware of the risks associated with such an investment. All these factors add up and prevent the investors from investing in these coins.

However, the right education about crypto assets will instill confidence in the financial investors and help them understand what they are investing in.

Source: Medium

Blockchain Transition Will Accelerate

The year 2020 was a historically tough year for many people. However, it led to numerous unexpected events, such as the new blockchain trends.

There is no denying that the masses have widely accepted blockchain technology. At the same time, cryptocurrencies still face the challenge of being accepted and surviving in the market.

The big names in the finance industry have already invested in blockchain. The transition is believed to accelerate in 2021. It is yet another significant challenge that Cryptocurrencies will face this year.

New initiatives are underway that involve blockchain but not cryptocurrencies. Hence, once blockchain technology starts without crypto, the crypto market will fall.

However, the blockchain projects will require a reorientation as they ignore the key features such as small contracts, decentralized consensus, tokenization, etc. The financial experts claim that almost ninety percent of the blockchain project will need to be replaced within a year,  which will prove to be a boon for crypto enthusiasts.

Bad PR Image

Cryptocurrency suffers from bad PR problems. The low-quality ads, cringe-worthy campaigns, get rich fast scheme, and other criminal activities have created a bad image for cryptocurrencies. Many people associate cryptocurrencies with age-old frauds and scams.

Thus, even after going through a boom phase, people find it hard to invest their trust and money in the crypto market.

It might seem like a small issue. However, this misconception has hindered the growth of crypto for years. Without proper knowledge about these coins’ working, people will continue to fear to invest in these coins.

Source: The Rail Media

Decentralized

Cryptocurrencies are yet to be legalized. These coins are purely digital assets, and there is no controlling body governing the transactions. Providing user protection is a big problem that will hinder cryptos’ growth in the future.

Final Word

The crypto industry will face the following challenges this year. Hence, the year 2021 will shape cryptocurrencies’ future either for the best or for the worst. However, the proper knowledge about the working of these coins will help to limit these challenges to a great extent.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

32  +    =  36