Signs Showing That Cryptocurrencies Are Gradually Merging with the Real Economy
For over a decade, the crypto economy was running in parallel with the real economy. The fact that cryptocurrencies were and are still not regulated by Central Banks made these digital assets impervious to developments that affected assets which one classifies as “traditional”, or as “real economy assets”. Nevertheless, and even though the rules have not changed, it feels like the performance of the real economy is starting to affect the value of assets like Bitcoin, Ethereum or Ripple. The most visible signs began appearing on week 36 of 2020, when Bitcoin lost the momentum it had been building for months, following the uncertainty that has been building at Wall Street.
Ever since the beginning of 2020, Bitcoin has been on an unstoppable upward momentum. Crypto investors were cashing out large sums in profit. One can only compare these profits to the profits players make when playing casino games. This, of course, does not apply to all casino games and to all casino players, but it can happen when one wins at a bonus round featuring big wins with the Starburst slot, or other similar online games. Bitcoin’s price went from 4,000 USD to 11,000 USD in less than six months, making people think that the asset’s darkest days were behind it. However, the transactional activity at the world’s largest stock market during week 36, put a halt to Bitcoin’s impressive journey.
Many crypto investors are already worrying about what might happen if Bitcoin drops below that “psychological” 10K mark. Still, there is very little evidence showing that something like that can have negative long term effects. It is true, that Bitcoin and every other cryptocurrency lost 80% or more of their value after the crypto bubble burst, but at that point, the crypto market was still in infancy. Today’s cryptocurrencies are financial assets that are used for a number of transactions. Crypto coins earn the audience’s trust, when the market sees that tech giants like Microsoft accept payments in Bitcoin. This trust engages serious investors to put their hard-earned money on crypto assets. In turn, this leads to a healthier crypto trading activity.
Fully mainstreaming crypto coins is definitely going to take time and there will always be a grey area activities, for which the real economy will need to find solutions. This might not be very easy, but where there is a will, there is a way. A very good example is the situation in Switzerland, where citizens can pay their taxes in Bitcoin. The use of cryptocurrencies is already high, and it is only going to get higher. Central Banks, large financial corporations and economy experts will need to work together to sort out the details for a flexible regulatory crypto framework.
The full integration of the crypto economy into the real economy is only a matter of time. The more we as consumers look for practicality in digital transactions, the more businesses will look for ways to implement cryptocurrency payments among their list of transactional methods. In turn, this will force financial institutions to become more flexible, which will then apply pressure to Central Banks to find answers on how to roll out collective crypto acceptance guidelines for the markets.