It was an eventful year for the world of digital currencies. In May, Tesla boss Elon Musk caused a scandal when he criticized the largest cryptocurrency Bitcoin for its massive energy consumption. At the same time, regulators in the USA, as well as in China and now in India, wanted to tame the fast-growing industry with new regulations. China, once an important center for digital currencies, has completely banned the trading and operation of blockchains, known as mining.
This caused price fluctuations, as was last seen again on the weekend when the Bitcoin price fell by around 20 percent after taking profits, but then recovered. Despite such setbacks, the industry is experiencing a boom and will continue to find its way into the mainstream in the months to come.
Three developments will make a significant contribution to this:
Point one: Traditional financial companies are expanding their business with cryptocurrencies. Goldman Sachs killed its crypto trading desk again this year as more and more customers are asking for ways to benefit from its highly volatile products. Banks are not allowed to keep cryptocurrencies on their books. But that doesn’t stop them from bringing complex derivatives to market and making money from them.
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Banks and crypto go hand in hand
The latest idea being discussed on Wall Street: accepting Bitcoin from corporate customers in order to grant them loans secured with cryptocurrencies. America’s largest bank, JP Morgan Chase, invited to the “Crypto Economy Forum” at the end of November and also gave the participants an NFT for the first time. This stands for non-fungible tokens and means digital certificates of authenticity that are mapped on the blockchain. The area is currently experiencing an unprecedented boom. The fact that JP Morgan is also experimenting with it has a signal function: If you want to be successful as a bank, you have to signal to corporate and private customers that you have understood new trends.
That would also be a departure from the original scenario, according to which cryptocurrencies and the so-called decentralized financial system could replace the banks. The credit card company Visa, for example, has set itself the goal of building bridges between the old and the new financial world and benefiting from it itself.
An important development for point two: cryptocurrencies are no longer only found in the financial world. Thanks to the NFT boom, they have advanced into art, culture, and fashion. Even sporting goods manufacturer Adidas is now dressing avatar-like “Bored Apes” from the NFT project “Bored Ape Yacht Club” in digital three-stripe jackets and sneakers. Even if you’ve never been in a metaverse: Big brands have long since positioned themselves. They don’t want us to escape into the new internet world without us paying for digital versions of their products.
Metaversum becomes a meeting point for the old and new financial world
That brings us to point three:
There will be a tug of war. On the one hand, there are the advocates of the original concept of the crypto world, who advocate a decentralized structure in which there are no banks, stock exchanges, music companies or art dealers as intermediaries. You will continue to work on concepts to make this new world a reality.
On the other hand, there are companies like Adidas, Visa, but also Facebook’s parent company Meta, which wants to create its own metaverse. Here old concepts are taken into the new digital worlds, which makes it easier for the crypto industry to enter the mass market.
There will be no winner in this tug of war, but different forms and interpretations of decentralization and crypto-economies. That is not a problem, but the greatest success for the young industry. It has become multi-layered and is penetrating so many areas that it is impossible to imagine life without it.
More: How fund professionals are experimenting with cryptocurrencies