Cryptocurrency investing is similar to being on a roller coaster. The lowest point will feel like “having your head bumped” into the wall with stars around; this frightened, dizzy state is what every investor dreads. The highest position will give you that “top of the world” feeling. However, cryptocurrency is just that; it will enable investors to comprehend heights while simultaneously causing them to experience the aftertaste of peaks, which is, of course, plummeting.
What does the future of cryptocurrency look like? Better known by the abbreviation “crypto,” this digital money has burned millions of investors while also bestowing billions upon a select few. This eagerly awaited query has frequently been up for discussion.
What is Cryptocurrency?
In the context of cryptocurrencies, “decentralised” refers to a network unconstrained by the rules of governing bodies and other financial organisations.
Cryptocurrency is a blockchain-based digital currency that is “decentralised.” The “decentralised” network is a major factor in the success of cryptocurrencies. The “people’s digital money” that is enhanced by “collaborative people power” is a cryptocurrency, which is not governed by any one entity specifically.
Popular cryptocurrencies include Bitcoin, Ethereum, Litecoin, Polkadot, Binance Coin, and DogeCoin. The biggest evolution thus far has been in cryptocurrencies, but now NFT (Non-Fungible Tokens) and Bitcoin ETF (Exchange-Traded Fund) are also becoming quite popular in several nations.
What is Blockchain?
Blockchain is a private ledger, a secured database that records financial transactions. Bitcoin blocks contain information about financial transactions. The blockchain stores each new block in a linear and chronological order. Each “chain network” is completed with the addition of new blocks.
These widely dispersed chain networks can only be changed if most users support the change. The blockchain network has a hash code for each unique block. (These hash codes are extremely secure since they combine old and new block codes.) A mathematical operation that converts digital data into a string of numbers and letters is used to create hash codes.
Acceptance and Rejection of Bitcoin: The Two Sides of the Coin
Every nation views the realm of digital currencies differently. While some nations rely greatly on this modern financial investment, others are concerned about its environmental effects. The following nations have approved of bitcoin trading and payment:
1. El Salvador
Bitcoin is now El Salvador’s second official currency. Bitcoins are available for trading. In El Salvador, customers can use bitcoin to pay at restaurants and retail stores. In El Salvador, it is accepted and acknowledged by the law.
In Australia, a sizable portion of the population owns bitcoin. Australia accepts bitcoin payments legally. Within the Australian region, many influential businesses have adopted Bitcoin payments.
3. The European Union
Digital currencies are exempt from Value Added Taxes in EU member states (VAT). Countries in the European Union have established their regulations governing cryptocurrencies; using bitcoin as payment is acceptable.
4. United States
Trading of bitcoin and other cryptocurrencies is permitted in the United States. The largest stock exchanges in the world offer cryptocurrency trading. The United States maintains a lead in developing digital currencies since it is home to all the major software companies.
In Canada, using bitcoin as payment is acceptable. In eateries, coffee shops, and second hand shops, it is frequently accepted. To facilitate bitcoin trade, Canada has both centralised and decentralised exchanges.
The following nations have reservations about cryptocurrencies and forbid dealing with them:
The Russian authorities restrict payments made in bitcoin and other cryptocurrencies. Trading in bitcoin is prohibited in Russia.
The Central Bank of Bolivia forbids Bitcoin and other cryptocurrency trade.
Ecuador’s legislative assembly passed a bill that forbade the trading of bitcoin. In Columbia, all significant cryptocurrencies are likewise prohibited.
All major bitcoin exchanges and mining sites have been outlawed in China. China forbids the trading of cryptocurrencies in any form.
Bitcoin payments are forbidden by Vietnam’s State Bank, the country’s primary financial regulator.
The Non-Green Impact of Crypto
For some, cryptocurrency may be a secret portal to financial success, but it is impossible to overlook its unsustainable environmental practices. The mining of cryptocurrencies significantly contributes to rising carbon emissions. These procedures consume tons of electrical energy because mining is done on top-tier computers with extraordinarily high consumption rates.
According to an estimate, the amount of electricity used by bitcoin has risen dramatically to 1694.83 kWh, roughly similar to the amount of energy used by one US household for 58.09 days.
The average electrical energy consumption of smaller nations like the Netherlands and Ireland which are 6,238 kWh and 4,200 kWh, respectively—has been eclipsed by Bitcoin.
A Wand of Power for Investors
The cryptocurrency market is erratic and operates under the principle of “high risk, higher return.” Changes in the supply and demand cycle may lead to changes in the market. A cryptocurrency’s price change can also be influenced by other factors like trading volume and market beta.
The investors’ perception of this extremely unpredictable market is hazy. The annual returns that traditional sources of investment guarantee pale compared to the average annual returns of cryptocurrencies.
The average yearly return on fixed deposits is 6.95%. The typical yearly return on mutual funds is 8.66%. (Large Cap Stock in the US). The estimated yearly return on equities is 10%, even though different stocks offer various annual returns.
Every coin always has two sides. Sometimes “heads” lead the charge, and other times “tails” take control of the trail. Like stocks, cryptocurrencies attract potential investors with their high returns, but they are constantly wary of a potential meltdown. Even if cryptocurrency may be a “two-day virtual craze” for others, it is a real magic wand for billionaires who have made it. If “sustainable and environment-friendly” mining procedures are used, this future investment may dominate the field.