Cryptocurrencies are in crisis, but they are not going to disappear

The cryptocurrency market is currently facing its worst crisis since the introduction of the first virtual currencies in the 1990s and their subsequent democratization in the 2010s. Bitcoin, the leading cryptocurrency, experienced an unprecedented drop in late 2020 and has yet to recover. This decline has been compounded by the collapse of some so-called stablecoins, which are meant to be less volatile. The fall of cryptocurrency giants, such as FTX, due to allegations of fraud has also contributed to the market's instability. The aftershocks of FTX's collapse have hit investors hard and are likely to slow the pace of crypto adoption in the next few years.

Cryptoassets encompass tokens that can be used for digital currency purposes, investment in an entity, or products/services. Stablecoins are unique in that they are backed by a currency, commodity, or financial instrument to maintain their value stability. The extreme volatility of the cryptocurrency market and its association with speculation has raised questions about the sustainability of these assets. Additionally, cryptocurrency laundering rose by 30% in 2021, and fraud schemes cost investors over $1 billion in cryptocurrencies, as reported by the US Federal Trade Commission.

Despite these challenges, companies such as Starbucks and McDonald's have started to accept Bitcoin as a form of payment. The adoption of cryptocurrencies by public companies is increasing, and the user base for cryptocurrencies is growing year on year. Crypto.com estimated that around 295 million people had entered the cryptocurrency market by December 2021, with the number of users expected to cross the one billion mark by December 2022.

Cryptocurrencies also offer an alternative banking system for people with unreliable or insecure banking systems, making them accessible to a less affluent part of the population. The development of the metaverse and the growing interest in decentralized finance, which often relies on stablecoins, are factors that influence the sustainability of cryptocurrencies.

Despite the recent market debacle, experts believe that decentralized finance, particularly products backed by cryptoassets, is here to stay. The market has players willing to participate, and the increasing adoption of cryptocurrencies by public companies suggests that cryptocurrencies are not just a fad but an alternative payment option that will continue to grow.

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https://theconversation.com/cryptocurrencies-are-in-crisis-but-they-are-not-going-to-disappear-197777