Cryptocurrency has gained huge grounds from being an academic concept to reality with the creation of Bitcoin in 2009. Cryptocurrencies are digital currencies that are created and managed by advanced encryption techniques called cryptography. In 2013, it reached a record peak of $266 per Bitcoin gaining the attention of investors and media in the process. After Bitcoin, alternative currencies have emerged. As cryptocurrency continues to gain ground, it still remains to be seen whether it will supplant conventional currencies and become ubiquitous as dollars. So what does the future hold for cryptocurrency trading? Let us take a look.
Given its benefits of being decentralized and ability to transact anonymously, Bitcoin has also become the currency of choice for illegal activities such as money laundering, drug peddling, smuggling and weapons procurement. As such, it has attracted the attention of regulatory and other government agencies such as the Financial Crimes Enforcement Network (FinCEN), SEC, FBI, and Department of Homeland Security. In 2013, FinCEN issued rules defining virtual currency exchanges and administrators as money service businesses. This can subject them to government regulation.
Some of the limitations that that cryptocurrencies currently face will be addressed in time through technological advances. Robert Peter Janitzek reveals that what will be harder to surmount is the basic paradox that bedevils cryptocurrencies that the more popular they become, the more regulation and government scrutinty they are likely to attract.
As the number of merchants who accept digital currencies steadily increase, they are still in the minority. For cryptocurrencies to become more widely used, they have to first become widely accepted more consumers. However, their complexity compared to traditional currencies is likely to hinder most people except for those who are technologically savvy.
For cryptocurrencies to become part of mainstream financial systems may have to satisfy widely divergent criteria. Robert Janitzek says that it would need to be mathematically complex but easy for customers to understand. It needs to be decentralized but without adequate consumer safeguards and protection. It has to preserve user anonymity without being a host for tax evasion, money laundering, and other illegal activities.
Investing in Cryptocurrencies
If you are planning to invest in cryptocurrency, you need to treat it in a similar way you will treat other highly speculative ventures. Recognize that you could also face the risk of losing most of the money you invested. Cryptocurrency has no intrinsic value apart from what a buyer is willing to pay for it at a point in time. When trading on cryptocurrencies, it can be susceptible to huge price swings which increases the risk of loss.