The Rise of CSGO Skins as Collectibles

Initially designed as mere visual customization options, CSGO skins have ascended to the status of highly sought-after collectibles. Their ascent is fueled by several factors:

• Rarity and Exclusivity: Some skins are exceedingly rare, available only through limited-time offers or as infrequent drops. Their scarcity ensures high demand and, consequently, significant value.
• Aesthetic Preference: Unique designs and vibrant patterns can transform an ordinary weapon into a work of art. Players often pay top dollar for skins that catch their eye or showcase their individuality.
• Status Symbol: Owning rare or expensive skins can confer a sense of prestige within the gaming community, similar to wearing designer clothing in real life.
• Community and Culture: The CSGO community often rallies around certain skins, building a culture of collection and appreciation that adds intangible value.
• Investment Potential: Savvy investors recognize that certain skins, much like traditional collectibles such as stamps or coins, can appreciate over time, making them a potentially lucrative investment.

The popularity of CSGO skins is evidenced by their substantial presence in online marketplaces and the staggering prices some skins have fetched. Unique skins such as those with rare patterns or stickers from esports tournaments can sell for thousands of dollars. The phenomenon has caught the attention of investors who are now actively participating in the CSGO skin market, speculating on price movements, and seeking to profit from trading these digital assets.

Understanding CSGO Skin Rarity and Value

In the realm of CSGO, skins are more than just eye candy; they are a form of digital currency with varying degrees of rarity and value. The rarity of skins is categorized into a spectrum, ranging from the most common, known as “Consumer Grade,” to the exceedingly rare “Contraband” items. Between these extremes lie several other rarity levels: Industrial, Mil-Spec, Restricted, Classified, and Covert. The rarity is typically indicated by the color associated with the skin, which also hints at its potential market value.

The condition of a skin, referred to as its “wear” or “float,” plays a crucial role in determining its worth. Skins can range from “Factory New” to “Battle-Scarred,” with the former usually commanding higher prices due to their pristine appearance. However, it’s not just the wear level that affects value; certain skins gain additional worth due to unique characteristics, such as:

• Pattern Variance: Skins with randomized patterns can have rare alignments or colorations, making them more desirable.
• Stickers: The presence of stickers, especially those from notable esports events or rare collections, can significantly increase a skin’s value.
• Provenance: Skins previously owned by famous esports personalities or used in significant tournaments may carry a premium for their historical significance.

These factors, combined with the supply-demand dynamics of the marketplace, make some skins highly valuable, turning them into sought-after investment pieces.

The Marketplace for CSGO Skins

The trading of CSGO skins is facilitated by a bustling marketplace that operates on various platforms. The primary and most secure platform is the Steam Market, an official valve-run service where players can buy, sell, and trade skins using funds in their Steam Wallet. However, due to Steam’s trading restrictions and market fees, many traders turn to third-party websites that offer more flexibility and often lower fees.

These third-party platforms range from auction sites to trading bots and skin cashout services, each with its own set of rules and user experiences. Transactions on these sites can be conducted through direct peer-to-peer trades, automated trades with bots, or even through cash transactions using various payment methods. It’s important to note that while these sites can offer better deals and a wider variety of skins, they also carry a higher risk of scams without the security that Steam provides.

The process of buying, selling, and trading skins can be summarized as follows:

1. Acquisition: Skins are obtained through gameplay, purchases, or trades.
2. Valuation: The value of skins is assessed based on rarity, condition, and unique attributes.
3. Transaction: Skins are listed for sale or trade on the chosen platform.
4. Transfer: Upon a successful deal, skins are transferred between accounts, and payment is processed accordingly.

Investors and collectors must navigate this marketplace with diligence, staying informed about market trends and platform reputations to make profitable and secure transactions.

CSGO Skins as Alternative Investments

Exploring the realm of alternative investments, CSGO skins present a unique opportunity. Unlike traditional investments such as stocks or real estate, skins are digital assets with value in a niche market. The appeal of skins as investments lies in their liquidity and potential for high returns. They can be sold quickly on various marketplaces, and their value can skyrocket due to factors like game updates, discontinuation of certain skin lines, or increased demand from the gaming community.

Comparatively, skins are more volatile and speculative than conventional assets. However, for those with knowledge of the gaming industry and market trends, skins can be a high-reward investment. The key to success in skin investment is understanding the market dynamics and timing purchases and sales to capitalize on fluctuations in skin prices.

Investing in skins also offers diversification. As a non-correlated asset class, their value doesn’t move in tandem with traditional markets, providing a hedge against market downturns. Moreover, the digital nature of skins means they are not subject to physical degradation, unlike some physical collectibles.

Case Studies: Profitable CSGO Skin Investments

Several instances exemplify the profitability of investing in CSGO skins. One notable example is the sale of the “AWP Dragon Lore,” which fetched over $61,000 due to its rarity and the presence of a signature sticker from a popular player. This particular skin was part of a drop during an esports tournament, and its value was significantly enhanced by the player’s autograph.

Another case involved a “StatTrak M4A4 Howl” skin, which became contraband after its artwork was found to be copyrighted. The limited availability and unique status of the skin caused its price to surge, turning it into a highly coveted item among collectors and investors.

These examples underscore the potential for substantial returns in the CSGO skin market. Successful investors often share common traits:

• Market Knowledge: They stay informed about game updates, market trends, and community preferences.
• Patience: They wait for the right moment to buy or sell, understanding that value can increase over time.
• Risk Management: They are aware of the risks and conduct transactions on secure platforms.

Such cases highlight the importance of strategic buying and selling, as well as the need for a deep understanding of the factors that drive skin values. While not without risks, the success stories in the CSGO skin market are a testament to their viability as alternative investments.

Risks and Considerations in Skin Investing

Investing in CSGO skins carries its own set of risks and considerations that must be taken into account. Here are some of the potential challenges investors might face:

• Market Volatility: The value of skins can fluctuate wildly based on community trends, making it a volatile market.
• Scams and Fraud: The digital nature of skin trading opens the door to scams, such as phishing sites and fraudulent trades.
• Market Saturation: As more investors enter the market, the potential for oversaturation grows, which could lead to a decrease in skin values.
• Liquidity Risks: While certain skins are highly liquid, others may be difficult to sell, especially if they fall out of favor with the community.
• Legal and Regulatory Changes: Potential changes in laws or Valve’s policies could impact the market significantly.

Investors must approach skin trading with caution, conducting thorough research and using reputable platforms to mitigate these risks.

The Impact of Game Updates on Skin Values

CSGO game updates can have a significant impact on skin values. Here’s what investors should be aware of:

• Discontinuation of Skins: When Valve discontinues a skin or weapon case, the scarcity of those items increases, often leading to a rise in value.
• Gameplay Changes: Updates that alter gameplay can affect the popularity of certain weapons—and consequently, their skins.
• Aesthetic Updates: Visual changes to the game can also influence skin prices, as they may alter how a skin appears in-game.

Investors must stay informed about upcoming updates and understand how they might influence the market to make strategic investment decisions.

Strategies for Investing in CSGO Skins

Investing in CSGO skins requires a blend of market savvy and strategic planning. Here’s how to approach it:

• Market Research: Stay up-to-date with market trends. Track price changes on community marketplaces, and monitor forums and social media for insights into what the community values.
• Diversification: Don’t put all your eggs in one basket. Spread your investments across different skin types, weapon classes, and rarity levels to mitigate risk.
• Timing: Buy skins when they’re undervalued, and sell when they’re peaking. Pay attention to seasonal fluctuations and sales cycles.
• Specialization: Consider focusing on a particular niche within the skin market, such as knives or skins with rare stickers, to become an expert in that area.
• Long-Term Holding: Some skins may increase in value over time. Consider holding onto certain skins, especially those that are discontinued or from early game editions.

By applying these strategies, investors can navigate the CSGO skin market more effectively and increase their chances of a good return on their investments.

The Role of Community and Hype in Skin Prices

The CSGO community plays a pivotal role in determining the value of skins. Community-driven hype can cause prices to soar, especially when it comes to rare or aesthetically pleasing skins. Here are some ways in which community and hype influence skin prices:

• Community Endorsement: Skins favored by popular players or influencers can become highly sought after, driving up prices.
• Event-Driven Demand: Skins released during major CSGO tournaments or events often carry a premium, especially if they’re associated with winning teams or memorable moments.
• Meme Culture: Occasionally, skins become popular due to memes or viral trends within the community, leading to a temporary spike in their value.
• Collective Sentiment: The community’s general perception of a skin’s desirability can lead to sustained demand and increased prices.

Understanding these community dynamics is crucial for investors looking to capitalize on the fluctuating prices of CSGO skins. By staying engaged with the community and keeping a pulse on the latest hype, investors can make more informed decisions about when to buy or sell skins.

Future Outlook for CSGO Skin Investing

The future of investing in CSGO skins appears promising but is subject to several influencing factors:

• Game Popularity: The sustained popularity of CSGO is crucial. As long as the game retains a strong player base, the demand for skins is likely to continue.
• Market Trends: Trends in the skins market can indicate the direction of prices. For instance, certain skins may become popular due to gameplay changes or community hype.
• Technological Advancements: The evolution of gaming technology and platforms could impact how skins are used and traded, possibly opening up new opportunities for investors.

While the future is inherently uncertain, the current trajectory suggests that CSGO skins will remain a niche but potentially profitable investment avenue. Investors should monitor the game’s development and community sentiment to anticipate market movements and make informed decisions.

The Viability of CSGO Skins as an Investment Option

The exploration of CSGO skins as alternative investments reveals a complex and dynamic market, where virtual items have tangible value. Key points to consider in assessing the viability of CSGO skins as an investment include:

• Market Dynamics: The value of CSGO skins is influenced by rarity, aesthetic appeal, and community trends. Understanding these factors is crucial for successful investment.
• Liquidity and Returns: Skins can be sold rapidly on various platforms, offering potential for high returns. However, investors should be aware of market volatility and timing their transactions strategically.
• Diversification: Investing in CSGO skins can diversify an investment portfolio, as their value doesn’t correlate directly with traditional financial markets.
• Risk Factors: The market’s susceptibility to scams, potential legal and regulatory changes, and market saturation are risks that investors must consider.
• Community Influence: The CSGO community significantly impacts skin prices, with hype and endorsement driving demand for certain skins.

In conclusion, CSGO skins present a viable investment option for those with an in-depth understanding of the game’s ecosystem and the factors influencing skin values. While the market for CSGO skins is more speculative and volatile than conventional asset classes, it offers unique opportunities for high returns and portfolio diversification. Investors should approach this market with caution, armed with thorough research and a strategy tailored to navigate its complexities. With careful consideration of the risks and an eye on market trends, CSGO skins can be a rewarding addition to an investment portfolio.

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How Does Mining Work?

People who engage in mining are called miners. They use specialised equipment to solve mathematical puzzles, which are long sequences of numbers. When a miner solves such a problem, he or she receives a reward in the form of bitcoins. This reward is known as a block reward because a new block of data in the bitcoin blockchain is created each time a problem is solved.

Impact of Mining on the Blockchain

Each successful mining operation not only creates a new bitcoin, but also updates the blockchain, the central registry of all bitcoin transactions. This process adds a new block to the blockchain, which helps keep the entire network secure and up-to-date.

Why Is Mining Important?

Bitcoin network upkeep and growth depend on mining. This operation adds additional bitcoins to circulation and secures the blockchain system. Since each new transaction requires confirmation and addition to the common record, miners help ensure blockchain transparency and continuity by solving mathematical puzzles.

Mining safeguards the network from manipulation and assaults. The intricacy of the mathematical difficulties needed to mine a new block prevents attackers from altering the transaction record. The more miners participate, the more secure the system, as modifying blockchain information needs majority permission.

Bitcoin administration is decentralised by mining. Mining gives everybody with the right equipment an equal chance to maintain and expand the network, preventing major players from dominating and supporting bitcoin’s decentralisation.

Mining also keeps the blockchain updated, which ensures transaction continuity and relevancy. The bitcoin blockchain is one of the most secure digital assets since each new block strengthens the previous ones.

How Do Miners Get Rewarded?

Miners are rewarded for their work in the form of bitcoins when they successfully solve a mathematical problem and add a new block to the blockchain. This process is a major source of income for miners and an incentive to continue to support the network. 

The block reward was originally conceived as a mechanism that rewards miners for their contribution to processing transactions and maintaining the operational stability of the network.

The value of the reward is determined by the bitcoin protocol and decreases over time in a process known as halving. 

Halving occurs every 210,000 blocks, approximately four years, and is designed to control inflation within the system by gradually reducing the number of new coins issued into circulation.

History of changes in the reward per block:

• 2008: The reward was 50 bitcoins per block. This was set when the network was created to incentivise participation in the new digital currency.
• First Halving: After the first 210,000 blocks, the reward dropped to 25 bitcoins per block.
• Second halving: The reward decreased to 12.5 bitcoins.
• Third halving: The last known halving reduced the reward to the current 6.25 bitcoins per block.

When Will Bitcoin Mining End?

Bitcoin mining will continue until the last, 21 million bitcoin is mined. The design of the Bitcoin system places a strict limit on the total number of coins that will ever be created, and that number is 21 million. According to the current algorithm and network rules, the last bitcoin is expected to be mined around 2140.

This long mining process is due to a halving mechanism that reduces the reward per block every 210,000 blocks, or roughly every four years. 

This feature slows the rate at which new bitcoins are put into circulation and is designed to mimic the diminishing returns from mining as resources are depleted.

Estimated end-of-mining trajectory:

• Initial reward: At the beginning of Bitcoin’s existence, the reward per block was 50 bitcoins.
• Subsequent halving: With each halving, the reward is halved, making mining less profitable in terms of the number of bitcoins mined per block solved.

As a result, by the time mining ends, the reward per block will be so small that mining the last coins will be extremely slow.

Conclusion

Bitcoin mining is an integral part of the Bitcoin ecosystem that keeps the entire network functioning and secure. Halving provides a controlled and predictable decrease in the output of new coins, which helps prevent inflation and maintain the value of bitcoin. 

As we approach the final number of bitcoins, the importance of mining as a blockchain support process will only increase, maintaining its vital role in the Bitcoin network.

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Software Wallets

Software wallets are applications that can be downloaded and installed on your device for free. They create and store private keys directly on the user’s device, making them potentially vulnerable to online attacks. However, they provide convenient access to assets and can integrate with various blockchain platforms.

Popular software wallets in 2024:

• Trust Wallet: A feature-rich wallet with support for multiple cryptocurrencies.
• Exodus: Known for its user-friendly UI and support for many different blockchains.
• Coinbase Wallet: Directly linked to the crypto exchange of the same name and supports most popular assets.
• MetaMask: Focused on interacting with applications on Ethereum and similar blockchains.
• Rabbi Wallet: A new entrant to the market, gaining popularity among DeFi users for its functionality and design.

Hardware Wallets

Hardware wallets are USB stick-like devices that generate and store private keys offline. This makes them one of the safest ways to store cryptocurrencies, as the private keys never come into contact with the internet.

Leading hardware wallets of 2024:

Ledger: Offers several models with various features, including Bluetooth support.

Trezor: Open source and various models such as the Model T and Trezor One.

Tangem: Uses credit card-like cards to store cid phrases and private keys, making security management easier.

Keystone: Open source, includes a fingerprint scanner for added security.

Multiparty Computing (MPC) Based Wallets

MPC wallets are a new type of hot wallets that use complex algorithms to split a private key into multiple parts stored on different devices or in cloud storage. This increases security as multiple parts of the key need to be connected to access the funds.

Leading MPC wallet providers in 2024:

• Binance: Implements MPC technology in its wallets, providing additional protection for user funds.
• OKX: Also offers MPC wallets, focusing on usability and integration with trading platforms.

Choosing the Right Cryptocurrency Wallet

Choosing a cryptocurrency wallet is an important step that requires attention to detail and understanding your needs. You need to consider several key factors to ensure and optimise the management of your digital assets. 

Here are some of the key aspects to consider when choosing a cryptocurrency wallet:

• Level of security: Software wallets, though convenient, can be vulnerable to attacks as they are constantly connected to the internet. Hardware wallets offer a higher level of security as they store keys offline. MPC wallets offer enhanced security by splitting the keys into multiple parts.

• Transaction frequency: For users who transact frequently, software wallets are more convenient as they offer quick access to funds and ease of transaction management. Hardware wallets are better suited for long-term storage as they need to be physically connected for transactions.

• Ease of use: Some wallets offer additional features such as support for different currencies or integration with decentralised applications (DApps). Choosing a wallet with an intuitive interface can make asset management much easier.

• Cryptocurrency support: It’s important to choose a wallet that supports all the cryptocurrencies you plan to work with. Some wallets specialise in only one blockchain network, while others may support many different currencies.

• Privacy: Hardware wallets and MPC wallets offer better privacy as they minimise the risks associated with data leakage. Software wallets can be more vulnerable, especially when used on internet-connected devices.

• Cost: Software wallets are often free, while hardware wallets require a fee, sometimes costing tens of dollars. This is a security investment that can be worth it to protect significant sums of money.

Choosing the right cryptocurrency wallet depends on the balance between security, convenience and cost.

Conclusion

Each type of wallet has its advantages and disadvantages, and the choice depends on personal preferences and investment goals. Regardless of the choice, it is important to handle private keys and cid phrases carefully to ensure the safety of your cryptocurrency assets.

FAQs

Can I use more than one cryptocurrency wallet at the same time?

Yes, you can use multiple wallets at the same time. This can be useful to separate assets by risk level or to use different features.

What is a cid-phrase and why is it needed?

A cid-phrase is a set of words that is used to regain access to your wallet on any device.

Can I change a cid-phrase once it has been created?

No, a cid-phrase cannot be changed once created. If you lose or forget your cidphrase, you will not be able to regain access to your funds.

What precautions should I take when using software wallets?

Always use reliable anti-virus software, keep your operating system and applications up to date, and avoid using public Wi-Fi when making transactions.

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Understanding Cryptocurrency Wallets

Your digital entry point into the world of managing, storing, and transacting with cryptocurrencies is known as a cryptocurrency wallet. These wallets are available in a variety of forms, each of which offers its own set of functions and levels of protection. Here’s an overview of the main types of cryptocurrency wallets:

• Software Wallets

These are software programmes or applications that you can install on your computer or mobile device. Online wallets, desktop wallets, and mobile wallets are some examples. They are useful for everyday transactions, but they are prone to malware and hackers.

• Paper Wallets

A paper wallet is a physical document that contains the public and private keys to your bitcoin. They are not vulnerable to online hacking, but they can be lost or damaged in the real world.

• Hardware Wallets

Hardware wallets are specialised devices built only for the storage and security of cryptocurrencies. They are not connected to the internet, thus they are not vulnerable to most online dangers. Ledger and Trezor are two popular hardware wallet companies.

Best Practices for Securing Your Digital Assets

Now that we’ve covered the types of cryptocurrency wallets, let’s delve into some best practices for securing your digital assets:

1. Use Strong Passwords. Always set strong, unique passwords for your cryptocurrency wallets. Consider using a reliable password manager to keep track of your credentials securely.
2. Enable Two-Factor Authentication (2FA). Whenever possible, enable 2FA for your wallet accounts. 2FA adds an extra layer of security by requiring a second verification step, typically through a mobile app or SMS.
3. Regularly Update Your Wallet Software. Keep your software wallets up to date with the latest security patches. Developers frequently release updates to address vulnerabilities.
4. Beware of Phishing Scams. Be cautious of unsolicited emails or messages asking for your wallet information. Always verify the legitimacy of the source before sharing any sensitive data.
5. Backup Your Wallet. Regularly back up your wallet data to ensure you can recover your funds in case of device failure or loss. Store backups in secure, offline locations.

The Significance of Private Keys

In the world of cryptocurrency, private keys are the keys to the kingdom. They are strings of characters that allow you to access and control your digital assets. It’s crucial to understand the significance of private keys in securing your cryptocurrencies:

• Ownership and Control

Your private key is the ultimate proof of ownership and control over your digital assets. Whoever possesses the private key can access and move your funds.

• Irreversible Transactions

Cryptocurrency transactions are irreversible. Once executed, they cannot be undone. This underscores the importance of safeguarding your private keys.

• Importance of Custody

Never share your private key with anyone, and keep it secure. Online or offline, losing your private key means losing access to your funds.

The Advantages of Hardware Wallets

For the highest level of security, many cryptocurrency enthusiasts turn to hardware wallets. Here are some advantages of using hardware wallets:

• Offline Storage

Hardware wallets are not connected to the internet, making them immune to online threats like malware and hacking.

• Private Key Isolation

Private keys are stored securely within the device and never exposed to potentially compromised computers.

• User-Friendly

Most hardware wallets are designed with user-friendliness in mind, making them accessible to both beginners and experienced users.

Conclusion

Your digital assets should be your top priority when it comes to safety in the ever-expanding world of cryptocurrency, so be sure they are protected. You can assist protect your investments by ensuring that you are using the appropriate type of cryptocurrency wallet, that you are following all of the recommended security practises, and that you are aware of the significance of private keys. Wallets made of hardware, in particular, provide users who place a premium on safety with a solution that is both strong and easy to use. You will be able to traverse the world of cryptocurrencies with confidence and peace of mind if you keep these rules in mind and always remain vigilant.

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Online Shopping Revolution: Embracing Cryptocurrencies

Cryptocurrencies are changing the way we shop online, offering several advantages over traditional payment methods:

• Fast and Global Transactions

Cryptocurrencies allow for instant cross-border transactions without the use of intermediaries. This quickness is particularly advantageous for overseas online customers.

• Lower Transaction Fees   

For foreign transactions, traditional payment processors frequently impose exorbitant fees. These costs can be greatly reduced by cryptocurrencies, making purchases more inexpensive.

• Enhanced Privacy

Online buyers benefit from greater anonymity when using cryptocurrency. Personal information is kept secure even when transactions are recorded on a public ledger.

• Accessibility

Cryptocurrencies are available to everyone with an internet connection, allowing those in underserved areas to shop online.

Major online retailers and platforms, such as Overstock, Shopify, and PayPal, have started accepting cryptocurrencies, making it easier for consumers to use digital assets for everyday purchases, including at casinos with a 1$ min deposit.

Revolutionizing Remittances: A Global Game Changer

Cross-border remittances have long been associated with high fees and delays. Cryptocurrencies offer a transformative solution to this problem:

• Lower Costs

Traditional remittance systems can levy high fees, which frequently eat into the amount sent. Cryptocurrencies are a more cost-effective option.

• Instant Transactions

When compared to traditional channels, cryptocurrency transactions are handled swiftly, allowing receivers to access payments nearly instantly.

• Financial Inclusion

Cryptocurrencies give unbanked and underbanked people access to financial services, allowing them to receive and handle remittances without the need for a regular bank account.

Services such as BitPesa and Stellar are harnessing cryptocurrencies to make cross-border payments more accessible and inexpensive for everyone, bridging the global divide between families and loved ones.

Crypto for Good: Transforming Philanthropy

Cryptocurrencies are also making a significant impact in the world of philanthropy and charitable giving:

• Transparency and Accountability

The underpinning of cryptocurrencies, blockchain technology, allows transparency in tracking donations. Contributors can track the utilisation of their funds to ensure that they are put to good use.

• Reduced Administrative Costs

Charities frequently spend a sizable amount of their donations on administrative costs. Cryptocurrencies can help cut these fees, allowing more money to go directly to the cause.

• Global Reach

Donations can be made from anywhere in the globe using cryptocurrency, allowing contributors to support organisations they care about regardless of geographical limits.

Cryptocurrencies such as Bitcoin, Ethereum, and Ripple have been utilised in a variety of humanitarian endeavours ranging from disaster relief to providing access to education and healthcare in neglected areas, making it easier for individuals to contribute to global charitable organisations.

Challenges and Considerations: Navigating the Cryptocurrency Landscape

While cryptocurrencies offer numerous advantages, it’s essential to be aware of the challenges and considerations when using them in everyday life:

• Volatility

Cryptocurrencies are known for their price volatility. Users must be prepared for fluctuations in the value of their digital assets.

• Regulatory Uncertainty

Cryptocurrency regulations vary widely by country. It’s crucial to understand the legal framework in your jurisdiction.

• Security Concerns

Proper security practices are vital when using cryptocurrencies. This includes safeguarding private keys and using secure wallets.

• Educational Barriers

Many people are still unfamiliar with cryptocurrencies. Widespread adoption may require more education and awareness.

Conclusion: Embracing the Cryptocurrency Revolution

The usage of cryptocurrencies in daily life is no longer a pipe dream, but rather a reality. Cryptocurrencies provide practical answers to a wide range of real-world problems, from online commerce to cross-border remittances and charitable donations. Traditional systems struggle to match their speed, cost-efficiency, anonymity, and financial inclusivity.

The impact of cryptocurrencies on daily life will only expand as they evolve and acquire acceptance. However, it is critical to approach their use with caution, considering both the benefits and the challenges they provide. Cryptocurrencies, when used responsibly and with a dedication to security, have the potential to revolutionise the way we live and interact with the world around us, opening up new possibilities and opportunities for individuals and businesses alike.

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Ethereum: The Innovator’s Playground

Bitcoin remains prominent, but Ethereum has established itself as more than just a currency. Its platform allows developers to design and implement smart contracts and decentralized applications (DApps), which can function independently and enforce agreements without intermediaries. With its growing popularity, it has become an important part of the whole ecosystem and one of the most sought-after investments. Ethereum’s native currency, Ether, fuels these operations, acting as a “crypto-fuel” to the Ethereum ecosystem.

Cardano: The Scholar’s Crypto

Cardano, with its ADA token, presents a unique academic approach to blockchain technology. Its development involves a rigorous process of academic research, peer-reviewed papers, and formal verification, earning it the moniker of the “scholar’s cryptocurrency.” Cardano’s two-layered architecture separates the ledger of account values from the reason why values are moved from one account to the other, promoting flexibility and ease of use.

Binance Coin: The Exchange Royalty

Binance Coin, or BNB, serves as the native currency of the Binance exchange, one of the world’s largest cryptocurrency exchanges. Initially launched on Ethereum, BNB moved to its blockchain called Binance Chain. It provides transaction fee discounts for Binance users and powers the Binance ecosystem, exhibiting its multifaceted utility.

Dogecoin: From Meme to Mainstream

Starting as a playful meme, Dogecoin has transformed into a full-fledged cryptocurrency, basking in growing popularity. Its mascot, the Shiba Inu dog from the “Doge” meme, lends it a fun and friendly image. Despite its lighthearted origins, its simplicity and active community have allowed it to rise in the ranks of crypto assets.

Polkadot: The Web Connector

Polkadot, with its DOT token, aims to improve blockchain interoperability. It allows different blockchains to communicate and share information, addressing the problem of isolated blockchain networks. Polkadot’s multi-chain structure facilitates cross-chain transfers, enhancing scalability and efficiency in the crypto space.

Ripple: The Bridge Currency

Ripple’s XRP stands out with its design for facilitating real-time, low-cost international money transfers. It acts as a bridge between different fiat currencies, enabling faster transactions than traditional banking systems. Ripple’s underlying technology, this one provides a network where institutions can transact smoothly across national borders.

Litecoin: Silver to Bitcoin’s Gold

Often referred to as the silver to Bitcoin’s gold, Litecoin is a peer-to-peer cryptocurrency created by Charlie Lee, a former Google engineer. Launched in 2011, it was among the initial cryptocurrencies following Bitcoin and has managed to sustain a high level of recognition and respect in the cryptocurrency community. Litecoin has a faster block generation rate and hence offers faster transaction confirmation.

Chainlink: Bridging the Real and Virtual Worlds

Chainlink is a decentralized oracle network that aims to connect smart contracts with real-world data. Launched in 2017, it stands as one of the key players in the crypto market due to its unique technology that solves a significant issue facing many blockchain platforms: its inability to interact with external systems or off-chain data. Chainlink’s network provides reliable tamper-proof inputs and outputs for complex smart contracts, thus increasing its use cases and credibility in the crypto space.

Uniswap: Pioneering Automated Liquidity Provision

Uniswap holds a notable position among decentralized finance (DeFi) platforms. It operates on the Ethereum blockchain and has made a name for itself with its innovative “automated liquidity protocol,” eliminating the need for an order book. This protocol has set a new standard in the realm of decentralized exchanges, increasing Uniswap’s prominence.

These digital assets, each with unique characteristics and goals, represent the colourful spectrum of the cryptocurrency landscape. Their rise in popularity underscores the world’s shifting attitude towards traditional financial systems and its exploration of more decentralized, digital forms of currency. These trends will likely continue to evolve, drawing more attention to the world of cryptocurrencies. As with any financial endeavour, understanding these digital assets is key to navigating the fast-paced, volatile realm of crypto markets.

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This article will try to change the situation and convince the reader that cryptocurrencies can be one of the elements of a reasonable investor’s portfolio. Let’s walk through the following plan:

• Types of cryptocurrencies.
• Traditional cryptocurrencies as replacements for fiat.
• Advantages of ecosystems and DeFi projects.
• Memes, pyramid schemes and fraudulent projects.
• Peculiarities of investing in stabelcoins.

Types of cryptocurrencies

Cryptocurrency is the collective name for digital assets that work with blockchain technology. At the time of writing, there are more than 17 thousand different cryptocurrencies, which differ in purpose, encryption features, transaction speed, degree of anonymity of users, methods of passive income, type of issue, the maximum supply of currency, the presence of inflation mechanism, etc.

The main and common feature of cryptocurrencies is decentralization through blockchain technology. Blockchain is a database contained on the devices of the network participants, blocks of transaction data in this network are linked cryptographically, so it is almost impossible to fake information, for this you need to have control over most of the network devices. No one (not even the creator of the network) can tamper with the information himself. The system is quite cumbersome, so the transaction speed of the first cryptocurrencies (classic Bitcoin, for example) is quite low, but this problem is solved by modern projects (such as Solana).

Cryptocurrency projects are very different from each other, so for the most correct determination of the risks and benefits of investing, it is necessary to divide the cryptocurrency into conditional groups. Within this article we will distinguish:

• Traditional cryptocurrencies.
• Ecosystem cryptocurrencies.
• Stablecoins.
• Memes, shieldcoins and other fraudulent projects.

Traditional cryptocurrencies as replacements for fiat

Bitcoin’s creator, Satoshi Nakamoto (pseudonym) conceived to use blockchain technology to create a digital analog currency, the feature of which is its independence from traditional financial systems. Conventional currency is controlled by banks and the government, they control issuance and mediate economic relations between entities. Blockchain allows you to create a decentralized system, the information is not stored on one server (as in banks), it is simultaneously on the devices of users around the world, there is no single control center. Thus, the problem of sole control over the mass of money is solved.

Cryptocurrency has the property of “antifragility,” it is a dynamic system, in the future, independent of the economy of a particular state or interstate formation. On this basis, it has the following advantages over fiat:

• Decentralization. There is no way to fake transactions, you can not control them, the updating and operation of the network (in most projects) is made by a group of enthusiasts, who are rewarded for this in cryptocurrency.
• Relative cheapness and high speed of transfers around the world, with no restrictions.
• Deflationary nature of projects with limited maximum supply (Bitcoin, Zcash, Litecoin).
• Ease of use, no need to enter personal information to register a wallet.
• Security of transfers and the user’s identity. Most cryptocurrencies are extremely sensitive about the privacy of transactions. The identity of a cryptocurrency holder can be found out only if he or she has somehow provided his or her personal information in conjunction with the wallet address.

However, traditional cryptocurrencies are not without disadvantages, among them:

• High volatility, the price of cryptocurrency in a short period of time can change in any direction – to fall in 2 times, to rise in price by 3 times, etc. The upside stage is called “cryptolet”, the crisis stage is called “cryptozyma”, and winter is usually longer than summer.

Cryptoleto and cryptozyma

• Lack of a legal framework in most countries. The citizen’s cryptocurrency is not protected in any way, fraud in this sphere is not prosecuted, the holder himself is responsible for the safety of his funds. They try to fix the situation by introducing the concept of “digital asset”, but the privacy of payments play a cruel joke here, it’s very hard to catch a fraudster, especially if he followed the rules of basic care when dealing with a purse.
• High commissions outside the system, cryptocurrency conversion to fiat eats up a significant part of the amount.
• Bad reputation. For most citizens, cryptocurrency is a financial pyramid with complex technical content. The situation is gradually changing due to the work of enthusiasts; in 2021, 60% of surveyed Americans are interested in cryptocurrency and consider it as a means of payment. The number of searches on search engines is also growing.

Benefits of ecosystems and DeFi projects

Crypto-enthusiasts quickly realized that it is not enough to create a convenient decentralized currency, it is necessary to form around it a number of tools inherent to traditional finance. Handy applications for wallets and transfers, options for passive income without the use of expensive equipment (mining), the ability to take a loan, quickly buy the necessary cryptocurrency or exchange it for another, etc.

A significant part of cryptocurrencies is the internal currency of individual projects, among the largest:

• BNB is the cryptocurrency of the largest cryptocurrency exchange Binance,
• UNI is the native token of the largest decentralized crypto exchange Uniswap.
• NEAR is a token of the NEAR Protocol blockchain platform.
• MANA is a cryptocurrency of the Decentraland project, which uses blockchain to create a meta universe.
• APE is the token and security counterpart of the decentralized developer community ApeCoin.
• AXS is the internal currency of the blockchain game, Axie Infinity.

In addition, there are cryptocurrencies that act as the basis for the creation of other cryptocurrencies, tokens or even blockchains. The most popular ecosystem today is Ethereum, it includes several hundred projects and about 200 million users (this is the number of wallets that hold ETH cryptocurrency), other similar projects are actively developing.

Increase in daily Ether transactions

For example, Solana, one of the fastest blockchains, has squeezed out competitors in 5 years and entered the top 10 cryptocurrencies by capitalization. More than 13 thousand tokens have been created on the blockchain, and the number of active wallets is growing.

The advantages of investing in such cryptocurrencies:

• Fundamental analysis. Some cryptocurrency projects are created and maintained by legal entities that publish financial information in the public domain. If there are no specific reports, you can use the information on official resources (websites, accounts in social networks), where they often publish specific figures and tell about the achievements of the project. In the end, there are observers, where you can find a variety of reliable information about the number of active users, the circulating supply of cryptocurrency, etc.

Variety of assets

• Interested in projects with a gaming or social component – there is StepN, Axie Infinity, Sandbox and many others.
• Believe in the future of blockchain and want to invest in a technology project – the high-speed Solana, developer-oriented Algorand, Bitcoin’s main competitor Ethereum, etc.
• Do you think that cryptocurrency can compete with traditional financial institutions – Aave lending platform, Function X bank replacement, another lending platform, more popular and versatile JUST, etc.
• And this is not a complete list, the world of cryptocurrency attracts programmers who create interesting and daring projects, from the use of blockchain at the state level with the Russian Waves, to artificial intelligence technologies Fetch.ai.
• Passive earning – stacking, etc. Stacking is a variant of passive earning with cryptocurrency, when a user keeps his assets in a certain wallet and thus ensures the system is operational. But, in addition to the classic stacking, there are other ways, it depends on the specific project. A token holder can lend its assets, rent the power of its PC for a fee (Livepeer, Render Token), become an encrypted server for storing other users’ data (Siacoin) and so on.
• The ability to participate in the life and development of the project. The same principle works here as with the shares. By buying tokens for some projects, you become their co-owner. Together with other users, you can make management decisions and determine what the project lacks and what you need to get rid of.
• Privileges. This depends on the specific issuer, DeFi projects give better credit or deposit offers, cloud storage allocates more space for information, streaming blockchain platforms offer better broadcasting quality, etc.

Despite all the pluses, investing in specific projects has the following nuances:

• Most of the information about the projects is presented in English on the official websites, we have tried to correct this situation, and described more than a hundred different cryptocurrencies.
• Blockchain itself is not new, there is specialized literature and relevant courses to learn the basics. But some projects go further and work with experimental technologies like Web 3.0 (Polkadot, Polygon, Lisk) or Internet of Things (XYO Network), which scare most investors with its technical complexity.
• You can run into a pacifier, more about such projects below.

Memes, pyramid schemes and fraudulent projects

Lack of regulators and legal responsibility for cryptocurrency market actions led to creation of thousands of fraud projects, pyramid schemes and useless tokens (“memes” projects).

Scams are little-known tokens and cryptocurrencies, they are usually not available on major exchanges, you can only buy them in an exchange or on the official website of the project.

Financial pyramids – a significant part of NFT and GameFi projects are essentially classical financial pyramids, but the incentive for new users is not the hypothetical possibility of enrichment, but an interesting gamble or desire to collect something.

Memes (Dogecoin, Shiba Inu, Floki Inu) are joke projects, created for fun, have no specific goal and vector of development.

All such projects have the following features:

• Lack of a clear goal of creation.
• Unthought-out economics, the price of cryptocurrency changes unpredictably (for example, under the influence of tweets of Ilon Musk).
• Advertising on non-core resources (blogs, YouTube, etc.), which promises huge benefits to all who buy.
• Centralization and lack of the usual openness for cryptocurrencies, it is hard to track transactions, the “controlling” package of tokens belongs to the creator, he controls the issue, etc.
• Extreme volatility. For example, a sharp jump in price after creation of a cryptocurrency (at that moment, the creator collects profit and leaves the project) and the subsequent fall.

On such a project, you can earn a lot and quickly, if you sell everything in time, but the ethical side of the issue remains on the conscience of the investor.

Peculiarities of investing in stabelcoins

Stablecoin is a type of cryptocurrency whose price is pegged to a real asset, such as a dollar (Tether) or gold (PAX Gold). In general, stabelcoins can be divided into three categories:

• Secured by a real asset. The company issuing the stabelcoin has currency, gold, precious securities, or property in its account that supports the price of the token. Typically, exchanging such a token for fiat causes it to “burn.” It is not possible to mine such staplecoins, their issuance is strictly centralized. Examples: Tether, USD Coin, PAX Gold, SwissRealCoin, etc.
• Secured by another cryptocurrency. Differs from the first option in that the issuer does not have traditional assets in his account. Examples: Dai Token, Reserve Rights.
• The price of the token is supported by a special algorithm. There is no collateral, there is no centralized issuer to control everything, the token economy works based on a mathematical formula. Examples: TerraUSD, Neutrino USD, Fei Protocol, etc.

The main benefit of stabelcoin (besides its stability) is the ability to pay for goods and services with a stable and decentralized currency.

The growth of interest in stablcoin

But investing in and working with stabelcoins still has a number of peculiarities:

• Most popular projects are centralized, which means the user may be restricted in some way by the issuer (or by a court order to which the issuer must comply).
• From time to time, regulators have doubts about whether projects are really 100% backed by fiat or property. For example, Tether repeatedly faces reality checks on its assets.
• Algorithmic steblecoins are not reliable, there is a risk of losing token value, this happened with the TerraUSD project.
• Central Banks are taking stablcoins seriously, experts predict that they will either be banned or come under state control. In this case, they will completely lose their decentralization, it will be impossible to use them to bypass all sanctions. Stablecoins will essentially become more technological fiat.

Conclusion

Cryptocurrency is a promising asset for investment, the purchase of which should be approached with caution and responsibility. The main difference between cryptocurrencies as an investment tool and traditional assets is that:

1. Cryptocurrencies are not yet regulated by laws.
2. investing in cryptocurrencies = investing in technology.
3. a lot of empty and fraudulent projects.

At the moment, investing in any cryptocurrency has its own risks, common to all – high dependence on the news background and the influence of big capital, it is best seen in the crisis. In a difficult economic situation, the largest holders of cryptocurrencies are rapidly selling their assets, causing an avalanche-like fall and panic in the ranks of cryptoinvestors, who are prophesied another “end game. Experts have promised more than 400 times that the cryptocurrency pyramid is about to collapse.

The same rule works for bitcoin and any other cryptocurrency as for ordinary assets – look for growth sources, promising and undervalued projects.

The post Risks and Benefits of Investing in Cryptocurrency appeared first on B_Sai.

So how can two such opposite answers be combined?

We call bitcoin a cryptocurrency. The currency root “coin” is firmly ingrained in our minds. But, on the other hand, most of those who make transactions with cryptocurrency and strive to possess it, learning the tricks of mining, see bitcoin as a value that grows in value. That’s what they call an asset. So, in order to imagine a plausible future for a cryptocurrency like bitcoin, we have to make up our minds: is it money or is it an asset? Of course, this opposition is partly artificial, because one of the functions of money is to serve as a means of accumulation. Money made of precious metals became real treasures, and today’s money also represents the world’s wealth, it measures accumulated assets, and it is traded on exchanges. Any currency becomes an asset when it has certain properties that allow a person to protect their savings.

Does cryptocurrency have the qualifying attributes of an asset? So far, there is only one sign – it is steadily growing in price (or rather, steadily growing). Since December 2017, the bitcoin price has been experiencing quite serious declines and encouraging attempts at growth. These fluctuations bring bitcoin closer to “speculative” assets. But “classic” speculative assets fluctuate in price because they involve risk, high returns are expected on them, the companies that issue them earn significant and quick profits, expand their operations, produce products or provide services with high end demand. Investors are evaluating all of this and the market is looking to find a “fair” price for such assets.

And why is bitcoin rising in value? Simply because it is growing! There is a theory that its quantity, like gold, is limited. But gold is not only growing in value because it is rare. It also has a commodity value, not to mention that it is still a “reserve asset. And bitcoin has no commodity or use value. Maybe its value is in the fact that it is a future currency with which everything can be bought someday. That is why we must hurry now to stock up on tomorrow’s universal means of payment.

If the version has the right to life, let us ask ourselves another question: does bitcoin have the signs of a future currency? On the one hand, the number of electronic wallets and accumulated amounts in cryptocurrency is growing, and more and more “cryptomats” – machines that can convert accumulated bitcoins into cash are being installed. However, cashed cryptocurrency immediately becomes traditional dollars, euros and yen. From time to time it is reported that bitcoins were involved in a particular transaction as a means of payment. Someone was the first to buy a pizza, somewhere managed to buy real estate. There are those who proudly look at T-shirts hanging in their closet, for which so much bitcoins were paid that today they could buy a new luxury limousine or maybe their whole garage with them. But these are all exotic cases.

The reality is much more prosaic: the owners of 99% of all bitcoin wallets possess, on average, only 10 bitcoins or less. At the same time, 56% keep less than 0.001 bitcoins in their wallets, which equals $8-9 in value. The average “thickness” of nearly 15 million wallets is $1.5!!! And the average value of cryptocurrency accumulated on one of all 26.4 million wallets is about $5,500. The concentration of bitcoins is very high. Owners of just 2 wallets own $2.8 billion worth of bitcoins, while owners of 148,000 wallets (0.56%) own $127.1 billion (87% of their entire accumulated market value). These calculations are made at a value of about $8,700 per bitcoin. Their market value may change, but the level of concentration is unlikely to be elastic to fluctuations in the conjuncture.

Conventional wealth is also highly concentrated. According to recent data, 1% of the world’s population owns almost 90% of all assets. But these are assets: stocks, bonds, precious metals, real estate, cash. If we talk about money, the means of payment that are not embodied in assets, their concentration is much lower. For example, in the United States, according to surveys, Americans with an average income of $50,000 to $75,000 a year (the median income in the United States is about $55,000 a year) are among the most cash-hungry and cash-paying individuals. The average amount of cash they have is $113. These cash lovers in the U.S. are 8% of the population. Those who keep cash just in case are 26%. Their average income is $25,000 to $50,000 a year, and the average amount of daily cash in a wallet is $64. Notably, Americans who have no daily cash at all and pay wherever they can, mostly with credit or debit cards, are 13%. Their average income is lowest, less than $25,000 a year.

These figures suggest that the ownership and use of cash in the largest financial economy in the world is still fairly distributed, one might even say democratic. And this is quite understandable: the nature of money as a means of payment rules out its high concentration, which is tantamount to removing cash from the economic turnover. If cash is, as they say, thesaurus, it means that there must immediately appear money surrogates, new means of payment. No one has cancelled the law that bad money replaces good money. But the main thing is not even this. It is the fact that the value of assets, for example, in dollars, significantly exceeds the value of cash or equivalent means of payment in circulation – the money supply. There is literally an Everest of financial assets looming over the pile of cash. There is no such mass of bitcoin assets around bitcoin. Not because bitcoin is not embedded in the system of economic activity, but because it is not money per se. It is still the embryo of likely future cryptocurrencies.

Another deterrent is sharp fluctuations in price. Let’s imagine that the value of some currency changes dramatically in value. How would its rational holder behave? If the currency is getting cheaper, he will try to spend it as quickly as possible and turn it into goods and the goods or services he needs. After all, if he hesitates, he loses. As the value of the currency falls, he has to give more and more of it for a good or service. A decline in the value of currency provokes him to spend it. And if the currency is rising sharply in value, its owner will restrain his spending and save. If he continues to spend, he, again, will incur losses, because he will keep the money and buy more goods with the same amount of currency after a while. The appreciation of currency contributes to its accumulation.

Now let’s look at bitcoin, which has no pronounced signs of assets, primarily such as expected income based on economic activity, does not yet create the bitcoin assets that will follow it in the blockchain space. The signs of currency in it are barely discernible. At the same time, it has the characteristics that prevent it from being a currency – a high concentration of ownership and sharp fluctuations in price.

So what might determine bitcoin’s chances of taking a full-fledged place on the list of currencies?

First. There should be a demarcation of today’s cryptocurrencies into potential currencies and crypto-assets, which primarily become tokens issued during ICOs. Initial public offerings of crypto-assets should gradually acquire the features of initial public offerings of securities and financial instruments. Naturally, not in form but in content. If today, by placing tokens, issuers expect that they will grow in value like any other cryptocurrency, which, in fact, attracts investors, then in the future they will have to think about paying their investors a regular remuneration from the income from specific activities. An ICO is a form of crowdfunding and often involves doing business. That is, the token should become inherently a crypto-action or crypto-bond, with all the characteristics of the classic samples of these financial instruments, primarily the income paid out under certain conditions.

Second. Cryptocurrency should gradually spread to more owners. But not only that, there must be appropriate banking services (cryptobanking). It was banks that broke the monopoly of gold as money, replacing it with credit money. Cryptocurrency credit money is what will expand the circulation of cryptocurrency as such. Without the formation of a crypto-financial infrastructure, even a virtual one, there will be no cryptocurrency. It will not overcome the purely technological limitations of bitcoins, but it will create bitcoin assets that will multiply as exponentially as financial assets multiplied on the basis of even gold money circulation. In the Middle Ages, banks did not create gold – they multiplied liabilities, often severely detached from the stock of real gold in their vaults. This caused crises and crashes, but that’s how the modern financial system came about.

Third. The value of cryptocurrency must stabilize. Of course, it will change as existing currencies change, but it can’t be percentages, much less times. In fact, it doesn’t matter how much bitcoin will be worth, as long as its price fluctuations become close to the fluctuations of classic world currencies. Demand for bitcoin as a means of payment and investment, for example, will drive its value up. Reduced volatility will scare off speculators. Somewhere the market will find a balance.

Fourth. No matter how we call cryptocurrency private money, we can’t do without some kind of regulation system. Circulation of cryptocurrency should be subject to rules. Whether it will become a monopoly of the state or some kind of self-regulating system of private money, it is difficult to predict now. The latter option will be very aggressively accepted by state banks, and the first, by and large, makes no sense, because even today national currencies begin life as records in the accounts of central banks and state treasuries. And the current conventional currency is in a sense “crypto.”

Fifth. Cryptocurrency must be believed in – not only in the dark corners of the Internet, but also by the general population. It must integrate into objective, legal economic activity. That means it must begin to supplant conventional means of payment. What will happen to the accumulated debts in society, to the reserves? So far, two extremes are being drawn. One – the complete destruction of the existing economic and financial system with the state at the head. The second – the transformation of private cryptocurrencies into an element of a vertical hierarchical economic system, closing in on the state in its new, unknown to us today format. Now we have not even reached this crossroads yet.

If all this, at least, is realized, it is quite possible that bitcoin or other cryptocurrency will eventually become the currency of the future.

The post Could Bitcoin Become the Currency of the Future? appeared first on B_Sai.

A general approach to predicting cryptocurrency rates

Many people complain about the volatility of bitcoin and forget that cryptocurrencies are a completely new asset class, and it is their highest volatility that attracts the attention of crypto-traders and crypto-investors around the world. Therefore, bitcoin forecasts cannot be approached with the standards and templates that are used when analyzing classic financial instruments. In my opinion, the main principle of forecasting cryptocurrency dynamics is not to try to guess the range of fluctuations, but to forecast the general trend, the general trend, being aware that temporary deviations from this trend can be very significant, and in both directions – both up and down. However, the criticism of cryptocurrencies for excess volatility is gradually fading, because investors start to perceive their wide fluctuations as a certain specific feature of this asset class, as one of its main characteristics, which just needs to be learned to work with. In addition, we are also seeing the maturation of the asset itself. Bitcoin has turned from some obscure digital coin into an asset in which large companies and even some states invest, and futures and ETFs on which are traded on the largest American exchanges. It turns out that not only the price of bitcoin has grown in the last couple of years, but also its role in global finance.

Bitcoin forecasts for 2022

Well, now let’s move directly to forecasts. Let’s start with predictions from various analytical agencies and experts.

JPMorgan

One of the most bullish forecasts on bitcoin was made by JPMorgan. In the beginning of the year analyst of the bank Nikolaos Panigirtsoglu stated that if bitcoin decreases its volatility, this will attract big institutional investors to it, and then in long term it will reach prices of $145K. Panigirtzoglu justified his position with the fact that bitcoin, in his opinion, will displace gold as an alternative to national currencies. However, at the end of the year, JPMorgan lowered the forecasted price. The analysts estimated the fair value of bitcoin at $35,000, but also noted its declining volatility and said that $73,000 is a reasonable target for bitcoin in 2022.

Bank of America

But Bank of America is skeptical of bitcoin. A December survey by the bank found that about 59% of managers surveyed believe the cryptocurrency is a bubble. That said, most expect bitcoin to stay in the $50,000 to $75,000 range over the next 12 months. Another 19% of respondents expect bitcoin to fluctuate between $25,000 and $50,000 next year, while 25% predict it will rise to $75,000.

Bloomberg

But Bloomberg Intelligence senior strategist Mike McGlone thinks bitcoin will break the $100,000 mark in 2022, helped by its recognition as legal tender in the United States. That’s a pretty bold statement when you consider that Fed Chair Jerome Powell said at the December Fed meeting that cryptocurrencies are not backed by anything, so recognition of bitcoin as a means of payment is unlikely for now. However, Powell said that he does not see cryptocurrencies as a threat to financial stability. And one more quote from Bloomberg analysts’ forecast for 2022: “Unrestricted supply of fiat currency should keep prices up, especially for bitcoin and ether, whose supply is limited.” It sounds logical, but let’s not forget that the monetary policy of the world’s largest central banks will most likely already in the second half of 2022 clearly turn towards tightening, which means that excess liquidity will be “pumped out” of the economy as part of the fight against inflation. Understanding this, one could argue with Bloomberg analysts.

Barry Sternlicht

One of the chief optimists about bitcoin is Barry Sternlicht, head of Starwood Capital Group. He thinks that in the future bitcoin can grow to a million dollars. But unfortunately, the billionaire didn’t specify when exactly this future will come. Meanwhile, he refers to one of the key advantages of bitcoin – the limited issuance, which makes this cryptocurrency anti-inflationary asset. By the way, this month bitcoin mining has passed an important milestone – 90% of all bitcoin “reserves” have already been “mined”, so there is a rational point in Barry Sternlicht’s words. But let’s try to calculate: if bitcoin is worth a million dollars, then its total capitalization will be approximately $18 trillion. And the total capitalization of the U.S. stock market is now equal to about $51 trillion. It turns out that for bitcoin to reach the level of one million dollars, almost half of the money from the U.S. stock market must flow into this cryptocurrency. By comparison, Apple, the largest company by capitalization, is worth “only” $3 trillion. In my opinion, it is extremely difficult for bitcoin to reach even those peaks. To catch up with Apple in terms of capitalization, it needs to rise to $150,000, which is still a pretty high bar for the first cryptocurrency. And reaching the price of a million will be even more difficult. Of course, gradual depreciation of fiat currencies due to inflation allows one to set such goals for bitcoin, but it will take many years to reach them.

Bank of England

And perhaps the most negative outlook for bitcoin today from the Bank of England. Representatives of the regulator warned investors that they could lose all the money they invest in bitcoin. “The price of cryptocurrencies can vary quite significantly, and theoretically or practically they could fall to zero,” the deputy governor of the Bank of England said. And Bank of England official Thomas Belmesh called bitcoin a “worthless” asset that cannot be used either as a means of payment or as a means of savings. As you can see, friends, the forecasts are very diverse and, given that the asset is relatively young and few people understand how to value it, it is very difficult to predict the dynamics of bitcoin. By and large, it is wrong to make predictions with a one-year horizon for cryptocurrencies at all – you need to evaluate longer-term trends, which are less affected by market noise. Nevertheless, let’s try to make our own bitcoin forecast for 2022.

InvestFuture Forecast

First of all, let’s pay attention to the most important factors that will determine the main trend of bitcoin behavior in the new year. Let’s start with inflation. It has been a long time since the world economy has seen such problems with inflation. Because fighting inflation is now the number one issue for the world’s central banks, it seems logical to expect bitcoin to weaken: if inflation goes down, so will interest in bitcoin as a tool to protect against this very inflation. But let’s not jump to conclusions.

In the first quarter of 2022, despite the turnaround in monetary policy by Western central banks, financing conditions will still be very soft and stimulative. The U.S. Federal Reserve, the European Central Bank, and even the Bank of England, which raised its policy rate slightly at its last meeting, still have key rates near zero. Even if the Fed starts raising rates in March and is projected to hold three rate hikes during 2022, monetary policy in the U.S. will still remain soft. Yes, we see Western central banks winding down their asset purchase programs, but they are in no hurry to reduce their bloated balance sheets. Therefore, the surplus liquidity will leave the markets very slowly, so the bitcoin exchange rate will probably be affected only in the second half of the year, and this negative effect will build up slowly and gradually. Thus, in the first quarter, bitcoin still has room for growth and a chance to return to historical highs – and even to renew them.

But from the second quarter, the negative impact on the cryptocurrency market will begin to intensify, and in the second half of the year, the cryptocurrency market may start to go into a depression. And the main source of the negative effect will most likely be two other factors, rather than a decline in inflation. The first is regulatory problems. Bitcoin has already reached a trillion-dollar capitalization, and regulators around the world can no longer just brush it aside and pretend it doesn’t exist. Questions about the regulation of cryptocurrencies are now being raised at every meeting of leading central banks. True, it’s not bitcoin that worries the authorities the most right now, but stabelcoin.

But even if regulators focus their efforts on regulating stablcoins in 2022, it could cause concern for bitcoin investors as well, because everyone has heard about bitcoin pumping at the expense of stablcoins and another “plumping” of the first cryptocurrency after the additional issue of Tether stablcoin.

And the second negative factor is the ESG trend. While talk of “dirty” bitcoin has recently subsided, the problem has not evaporated. Given that bitcoin still consumes a lot of energy, the active implementation of ESG standards around the world could also be a source of negativity for it. But on the other hand, more “green” cryptocurrencies may benefit from this – for example, Ethereum, which is moving to a new mining algorithm.

Conclusions

To summarize. In my opinion, we should probably not expect any fantastic growth from Bitcoin in 2022. The first quarter still gives hope that bitcoin will be able to break through the previous maximums and rise to about $70-75 thousand, but in the second half of the year we will most likely see its fall into the $30-40 thousand range. And in 2023, the decline may continue because of the final change of the central banks’ course towards a tightening of monetary policy. If we talk about specific price levels, it is worth paying attention to such bitcoin analysis tool as the onchain metric SSR – Stablecoin Supply Ratio. It is calculated as the ratio of the market capitalization of bitcoin to the market capitalization of all stablecoins. This metric shows that strong support for the first cryptocurrency passes at the $30,000 level. If regulators don’t use harsh crackdowns against stabecoin in the new year, this support is likely to continue into the second half of 2022, although bitcoin may test it at times.

That, friends, is how I see bitcoin dynamics in 2022 right now. Naturally, as the markets change, this forecast can and should be adjusted or revised altogether.

The post Bitcoin Exchange Rate Forecast for 2022 appeared first on B_Sai.

Revolution or evolution

The development of money is directly related to the application of new technologies and innovation. The leading role in this process has been played by enterprising Brits. For centuries one of the key problems of money circulation was the deterioration of coins, when their gold or silver content was constantly decreasing as a result of the trimming of the edges. This defect was remedied by Isaac Newton, who headed England’s mint in the late 17th century. During the Great Recoining, Newton ordered that all flawed and counterfeit coins be removed from circulation and replaced by new ones that were machine-made with a round ribbed rim, making them more difficult to further deface. Over time, increased foreign demand for high quality English silver coinage led to a shortage in the domestic market and necessitated a transition to paper money.

The flooding of the British economy with paper money became possible after the centralization of monetary circulation. Created in 1694, the Bank of England not only received the right to print paper money, but also secured the government’s obligation to cover the entire issue by issuing public debt. Its holders were thus assured a guaranteed income in the form of interest payments. A similar centralized model of money circulation was reproduced in the United States after the establishment of the Federal Reserve System in 1913. The Federal Reserve System (Fed) was established in 1913. Despite the fact that today the size of U.S. government debt has surpassed the $23 trillion mark, the economy of fiat money has very influential supporters, given that, along with the Fed, U.S. private investors and central banks in other countries are the owners of U.S. debt. In 2019, for example, the U.S. government’s net interest payments on government debt totaled about $390 billion, twice the capitalization of all cryptocurrencies in circulation.

Nevertheless, before paper money gained worldwide recognition, it was anathematized twice. The first time was in China back in the 14th century, when the inflation of paper money led to a ban on its subsequent issuance. Paper money suffered another fiasco in 1720 in the Scottish financier John Law’s failed experiment on the French financial system, which delayed its mass circulation in continental Europe for more than a century.

The transition from paper money to electronic money also began in London, where the world’s first ATM was installed on June 27, 1967. The prototype of the first debit cards appeared even earlier – in 1914, when the American telegraph company Western Union introduced a card for interest-free payments. True, at that time the card was made of metal sheet, not plastic as it is today.

Despite of modern wide spread of e-money, cash payments are still popular not only in developing, but also in highly-developed economies. In the modern world as a whole, the share of cash in transactions reaches 85%. For example, the share of cash payments in the total value of transactions in Austria, Germany and the U.S. is 65%, 53% and 30%, respectively. At the same time, only Norway and Sweden are experimenting with a complete renunciation of cash, where its share in the monetary supply was reduced to a symbolic 2.5%. Even after the advent of mobile payment platforms such as Apple Pay and Venmo in the U.S., cash in circulation has consistently increased, reaching $1.7 trillion in 2019.

Money or Technology

In addition to inertial barriers of political and technical nature, the mass spread of cryptocurrencies at the present stage is hindered by difficulties arising from their recognition as money. Any monetary system is based on trust in the ability of money to perform three main functions – means of payment, exchange and accumulation. The most painful for society is the depreciation of money, leading to a proportional decline in the value of created values. Trust in money is therefore based on its enduring social significance. Cryptocurrencies certainly represent a new word in the monetary sphere, but not so much as a monetary surrogate as a new technology of transaction accounting, which has the universal ability to embody the properties of money, commodity, property, financial asset and payment system without fully responding to any of them.

Yuan vs. dollar – a fight in the global financial ring

To draw a distinction between money and technology, let us turn to the following example. Over the past 30 years, the average cost per gigabyte of memory on a hard drive has dropped from $100,000 to a few cents. Does this mean that trust in dollars has gone up or that information has lost its social importance? No, it doesn’t. The decrease in the cost of storing information on a hard drive is a consequence of the development of technology and does not change the essence of money as a regulator of social interaction.

The benefits of cryptocurrencies

The main advantage of cryptocurrencies lies in the ability to reduce the cost of transactions and to involve the broadest segment of the population in financial transactions. The strengths of cryptocurrencies include decentralized (distributed) management, which means that no single entity controls the network; global access, which allows any user connected to the Internet to participate in the cryptosystem; security through cryptography, which protects the integrity of funds, which together give their users virtually unlimited freedom of action.

One of the main advantages of the Bitcoin system and a number of other cryptocurrencies is the zero transaction costs and simplified order of use. This attracts small and medium-sized businesses, as well as low-income citizens for whom access to bank cards is limited, and the transfer of funds through professional operators is too expensive. The flexible open source nature of cryptocurrencies allows programmers to develop these systems virtually online. It is believed that Bitcoin or other distributed (decentralized) network companies cannot be shut down because they do not have a single issuing center (central server).

Risks of cryptosystems

Along with the obvious advantages in practice, the operation of cryptosystems is flawed and reveals a number of serious drawbacks. The first problem is related to the limited bandwidth of the payment system. Blockchain-based cryptocurrency circulation involves two main participants – miners and users. Miners serve as bookkeepers and maintain the system infrastructure by updating the transaction list. Users make and receive payments. The financial incentive for miners is the fees charged to users for queuing up transactions. In order to generate user fees, the capacity of the system must be small enough. For example, the capacity through the Visa system is 3,526 transactions per second, while through the Bitcoin system it is 3.3 transactions. Capacity constraints overload the system, especially during peak hours, and lead to higher fees. For example, in December 2017, payment processing fees rose to $57 per transaction, regardless of the destination.

The second problem is the lack of payment finality guarantees. A payment recorded in the ledger does not guarantee that it is final and irrevocable. Cryptocurrencies are held by agreement between miners. If some of them collude and decide to rewrite the transaction history, the payment could be destroyed. In particular, such a precedent was set at Japan’s largest bitcoin exchange, Mt. Gox. In February 2014, this exchange declared bankruptcy after 850 thousand bitcoin coins worth half a billion dollars went missing, which somewhat weakened users’ faith in the perfection of cryptosystems.

The third problem is the enormous cost of operating a decentralized payment system. In the course of competition, miners add more and more blocks to their ledgers until their profits approach zero. The processing power of individual miner farms that mine cryptocurrencies is equivalent to the power of millions of personal computers. The total amount of electricity used to mine bitcoins in mid-2018 was equal to that of an average country like Switzerland. Other cryptocurrencies also use quite a bit of electricity. Such amounts of energy consumption can quickly become an environmental disaster.

In addition, double-checking all transactions constantly increases the volume of the blockchain. For example, a simulation of the spread of distributed ledger technology across economies such as the United States or China shows that, even under optimistic assumptions, the size of the ledger will exceed the capacity of a typical smartphone in just a few days, exceed the memory capacity of a typical personal computer in weeks, and go beyond server storage in months. Thus, only the capacity of supercomputers will allow the verification of all incoming transactions.

The fourth problem with cryptocurrencies is their extreme volatility, due to the lack of a central issuer designed to guarantee value stability through the use of various monetary policy instruments. The most successful Central Banks stabilize the intrinsic value of their currencies by adjusting the supply of payment instruments to match the demand for them. This is in contrast to cryptocurrency, where its supply is predetermined by the payment protocol. Therefore, any fluctuation in demand leads to a change in the value of the cryptocurrency, which makes it extremely unstable. For example, when bitcoin was created in 2009, it was worth 0.3 cents. Two years later, the price of bitcoin was $2, and at the end of 2013. – $1,000. In January 2015, its price dropped to $200 and did not return to the $1,000 mark until February 2017. In July 2016, the price dropped again to $640, and by the end of 2017, it had surpassed the $19,000 mark. In December 2018, the price dropped to $3,400, jumped to $13,000 in June 2019, and dropped to $7,268 in December 2019. Bitcoin’s market capitalization dropped 2.5 times from December 2017 to December 2019, from $320.5 billion to $131.8 billion, before starting to climb again in January 2020.

The fifth problem of cryptocurrencies is their lack of well-functioning regulation and anonymity, which increases the attractiveness of this system in criminal circles, in particular for the laundering of illicit proceeds and terrorist financing, committing cyber attacks, organizing the purchase and sale of drugs (which, for example, took place on one of the most popular anonymous Internet trading platforms Silk Road, which operated in 2011-2013).

It is believed that the introduction of Libra, a global currency, could address all of these shortcomings. The white paper, the text of which can be found on the website of the management company Libra Association, argues that the new currency will increase the speed of money transfers, lead to a significant reduction in the cost of borrowing, increase the responsibility of the financial sector in creating and offering innovative products to the market. By including in Libra hundreds of millions of new users, for whom traditional banking services are not available today for various reasons, tens of millions of jobs will be created, which will change the lives of billions of people. The participation in this project of regulators and experts in different fields will lead to the creation of a sustainable, safe, reliable, cheaper, more accessible and more connected global financial system.

The creators of Libra envision backing this currency with a reserve of real assets and tying its intrinsic value to a basket of currencies and services provided by its operators. Meanwhile, banks or real sector companies are not on that list yet.

In case of launching of digital currency Libra 2.7 billion users of social network Facebook will have access to it. If every subscriber makes a $1000 payment within Facebook using blockchain technology, the network could have an annual turnover of $2.7 trillion or 11% of the U.S. federal debt. The value of Libra, as well as all of this turnover, will be tied to the dollar (or a basket of currencies including the dollar), and therefore to the U.S. economy. It should be emphasized that other cryptocurrencies and many key technologies of the digital economy are also tied to the U.S. dollar.

Thus, American companies specializing in the creation and management of social networks offer their solutions in the monetary sphere, which, on the one hand, can be regarded as elements of disintegration of the global monetary system, and on the other hand, as its transition to a qualitatively different level – a global cybernetic financial system, in which the United States will have an unconditional comparative advantage.

The anonymous and decentralized nature of participants in cryptosystems questions the existence of a two-tier banking system. Global cryptocurrency opens the door to a digital hypermarket that knows no national borders, in which today’s fee revenues of traditional payment system operators can be transformed into tomorrow’s consumption by hundreds of millions of new digital economy users. When combined with Big Data, cryptocurrencies enable high-tech elites to create a payment system independent of the state and influence the behavior of individual social groups, consumers, and voters.

A glimpse from the future

It should be emphasized that the first digital currency projects emerged back in the 1990s (David Chom’s DigiCach, Ilon Musk’s PayPal, Sholom Rosen’s “digital dollars”) and were developed with the direct participation of system institutions such as Deutsche Bank, Credit Suisse and Citibank. However, in 2001, after the dot-com crisis, all these projects were shut down. It is difficult to predict the fate of today’s cryptosystems, given that there are already more than 5,000 digital currencies in the world and their number continues to grow.

Digital currencies are just a technology for recording transactions, which does not eliminate competition in the field of national currencies – the dollar, euro, pound sterling, yen, yuan. To overcome the devastating consequences of the global financial crisis and to protect their national economies from the unregulated elements of the global market, governments of sovereign states have teamed up with bankers and financiers, which has led to increased trends of protectionism and isolationism in the world economy. Joining this alliance of cryptographers and programmers could reinforce digital nationalism and reverse the globalization of the Internet. However, as history shows, economies cannot grow without constantly reducing transaction costs and other costs. Therefore, the question of how this cost reduction will take place in the context of increasing deglobalization remains open.

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