Five factors driving cryptocurrency adoption

It’s been two years since the global pandemic hit the world, and we’re still seeing how the impact is unfolding. With contact-free payments and the acceleration of a digital world, cryptocurrencies have seen an unprecedented wave of adoption in the last two years. With investors still cautious of the price fluctuations and volatility in the market (especially over the last three months, with the market facing a major correction), experts are waiting to see if the cryptocurrency industry going to slow down or continue its trend of adoption. There are other factors at play in crypto adoption, here’s a closer look at things that are going to drive changes in the industry in the next few years.

Increased adoption, driven by more use-case tokens

Startups in the space have been steadily increasing since the bull rally in 2017, with developers working on ways to improve current protocols and platforms in place. As more genuine cryptocurrency projects emerge, the process of buying, using, trading and transacting with cryptocurrency has directed the use of crypto to a broader spectrum of consumer awareness. The more people can use crypto (in practical ways, beyond investment), the more we’re seeing people using them.

Utility tokens that allow users to use cryptocurrency networks for things like supply chains, database storage, and interoperable transactions (allowing transactions across networks and industries) are helping the market overall expand.

The expanding world of decentralised finance

Non-fungible tokens (NFTs) have taken the digital world and crypto community by storm in the last year, with the NFT market predicted to increase significantly within the next few years. According to investment bank Jefferies, the market cap of the NFT market is set to increase from $35 billion USD to $80 billion USD by 2025. Individuals are seeing the long-term value of digital platforms in the Metaverse spaces, with projects like The Sandbox, Decentraland, and Wilder World picking up massive attention and shooting in value. As investors, collectors, and traders look to the decentralised space, there has been an increased uptick in new investors coming to the cryptocurrency industry.

The increase of interest in digital assets is leading to fresh attention to digital assets (both NFT and crypto-based) overall.

A combination of short-term traders, with long-term HOLDers

While the market itself might have volatility as new traders buy and sell tokens in the industry, data shows that long-term investors are holding onto their tokens. According to data released by crypto analytics firm Glassnode, more than 60% of all of the Bitcoin supply has not been moved in the last twelve months; a strong indication that longer-term traders are not looking to trade. This means there is fresh attention with new traders and investors entering the market, and moving tokens around (causing volatility in the space), but the majority of crypto holders are not looking to trade their tokens. This is bullish in the long run, as a major part of the community involved sees the long-term value of holding onto their coins.

Regulatory pressure and legislation

Regulation and cryptocurrency have been an ongoing theme for years, as countries across the world have worked to control a largely difficult asset to regulate. However, more countries have been paying attention to the digital currency industry and regulations and protocols are slowly being introduced in different countries across the world to protect investors and traders. Regulation in the decentralised space might be seen as a double-edged sword, as some purists believe that regulation sets to control the asset that is inherently meant to be decentralised from government interference but having regulation in place also helps introduce more users who might have been cautious or on the fence to use cryptos.

The expansion of digital currencies

There has been an explosion of countries piloting, testing, and looking to launch their own central bank digital currencies (CBDs) recently. The CBDCs work as digital assets to operate alongside a country’s traditional financial system, offering people more convenience and choice. As digital currencies, the nation-backed assets are introducing more people to the world of digital finance, making the transition to cryptocurrency smoother and more widely accessible.

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