International trade is one of the largest areas where blockchain plays a crucial role in its development. A quick look at the global cryptocurrency market provides a good starting point to understand this mode of payment. Blockchain technology can help reduce several complexities in this sector by providing better safety for international trade.
Financial institutes are slowly adopting some areas where blockchain has changed standard practices. Still, Blockchain technology has existed since 2009, but only since 2016 have we started seeing significant growth in its usage across industries like real estate and trade finance circles. Firstly, how did this start, and second, what is the impact of China’s influence on global cryptocurrency markets?
The rise of cryptocurrency and blockchain:
The rise of blockchain technology has resulted in fundamental changes in global trade and supply chains. The supply chain has been one of the most important areas where blockchain has significantly impacted companies.
Companies can use blockchain technology to recognize possession, authenticate identity, provide traceability and authenticity, etc. This feature of blockchain could be critical in ensuring the safe transportation of goods across several countries and ensuring that these are not tampered with during transit. The use of blockchain to track international trade is still at an early stage.
Expected growth of the cryptocurrency market:
The cryptocurrency market is expected to reach $3 trillion by 2025. The highest share of the cryptocurrency market is held by Bitcoin (BTC), having a share of over 46%. Ethereum has a share of 32%, Litecoin has 11%, and Ripple (XRP) has a share of 4%. The increase in the number of blockchain platforms also made it difficult for investors to invest in the right blockchain project, which can be seen as an obstacle to further market growth. Furthermore, the introduction of new ICOs and tokens by various startups are giving rise to risks like lack of trust, fraud, etc., which adversely affect this market’s growth prospects.
The global cryptocurrency market is fast growing, providing better opportunities for players and investors. Its growth can be attributed to its use in international trade, which is expected to see a significant boost with several countries’ bilateral trade agreements. However, despite the growth prospects and associated benefits, the cryptocurrency market has been volatile due to several factors like Japanese regulations being issued on exchanges, etc., which has curbed its growth in recent months.
Driving factors:
The current expansion of the cryptocurrency market has been mainly indebted to the presence of the US dollar. Due to this factor, several investors are increasingly looking towards blockchain and cryptocurrency technology as a potential replacement for the USD. In fact, from September 2017 – August 2018, there was a 62% rise in Bitcoin (BTC) and Ethereum (ETH) prices due to positive sentiments among investors compared to previous months.
Institutions: The increasing use of cryptocurrency by financial institutions is also an essential factor behind the bursting of the cryptocurrency bubble. Institutions like banks play a significant role in adopting blockchain technology in various sectors and will be instrumental in shaping future developments in this industry.
Regulation:
The tightening of regulations by financial institutions has also played a role in shaping the future of this market. One of the significant regulatory issues that are facing the market is double taxation. Financial regulators are trying to create a level-playing field where all financial players are classified accordingly.
Institutional investors: The increase in cryptocurrency trading activity among institutional investors is throwing up multiple opportunities for new startups. ICOs can help drive these investors towards new markets, and the sky’s the limit for future growth prospects of cryptocurrencies in this space.
Investors constantly seek opportunities to ride the cryptocurrency bubble and make a quick buck. The current boom in this market was fueled by the potential opportunity to become a billionaire overnight.
However, this is only expected to last for a while as the cryptocurrency bubble will burst sooner or later as several factors like Japan’s crackdown on exchanges, etc. have led to lower prices, thereby cooling off investor enthusiasm as per the critics.
Many investors have started losing faith in this booming sector because its size only grows daily. However, this is untrue, as the expansion of cryptocurrencies and blockchain is not merely witnessed due to its wildfire-like returns but also its capability to transform the world.
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