By Dr. Pooja Lekhi, Professor at University Canada West
Driving the growth of foreign remittances, strengthening e-commerce and facilitating cross-border transactions – cryptocurrencies are revolutionizing the world.
Cryptocurrencies Current Scenario
Cryptocurrency’s meteoric rise in market cap in recent years, and increasing recognition and adoption by institutional investors, is setting the stage for global success. The total value of all cryptocurrencies as of April 14, 2021, was around $2.24 trillion and the total value of Bitcoin, the most popular digital currency, was pegged at about $1,182.11 billion. Furthermore, there are currently more than 9,200 publicly traded cryptocurrencies, and cryptocurrencies continue to proliferate, raising money through initial coin offerings (ICOs).
Revolution of Bitcoin
Bitcoin, the undisputed cryptocurrency leader and one of the most volatile assets, has such a wavy history since it was outlined in a paper in 2009. Moving from a price of $1 to an all-time high of over $63,000 a coin in April 2021, Bitcoin’s market value recently crossed the $1 trillion mark. It has been on a bull run in recent years and is responsible for roughly 69% of the total market value of cryptocurrencies
Bitcoin’s growing use as a payment tool, the increasing availability of digital wallets, and attracting institutional investments ensure it will become the mainstream for international trade in the future. Major companies, including Tesla and MicroStrategy, have been investing billions in Bitcoin in recent months. Last year, PayPal also adopted cryptocurrencies to its platform —Bitcoin, Ethereum, Litecoin and Bitcoin Cash. And Square, an American payments company, recently bought $50 million worth of Bitcoin.
Reasons behind the cryptocurrency revolution
Powered by blockchain technology, crypto transactions are faster. For example, NANO takes 0.14 seconds to fully confirm a transaction. And there are no associated fees.
Cryptographic transactions are more secure, reducing the risk of fraud and cross-border transfers are instantaneous. When it comes to foreign remittances, transferring cryptocurrencies is highly cost-effective compared to transferring fiat currency through older platforms like MoneyGram and Western Union.
Apart from this, cryptocurrencies give users more control over their funds and provide scalability. Looking to the future, crypto is set to revolutionize the trading, e-commerce and retail segments.
The penetration of digital currencies in digital payments is expected to affect cross-border transfers, and digital currencies have the potential to become the main vehicle for e-payment, if not the only one. Many countries like Germany, the US and Japan have taken a positive stance on cryptocurrencies
The top five cryptos expected to grow exponentially in 2021
In the beginning, Bitcoin seemed to be the unchallenged leader in cryptocurrencies. But in recent years, Ethereum, Ripple and others have joined the race.
- Bitcoin (BTC):The first successful cryptocurrency continues to lead the pack. With its first-mover advantage, it became the de-facto cryptocurrency for mainstream investors. Even Smaller investors can use Square and PayPal services to buy as little as $1. Its prices surged to more than $63,000 in April 2021 for a market cap of more than $1 trillion – meaning Bitcoin accounted for more than 69% of the cryptocurrency market. Within four months, its price climbed from $28,000 in December 2020 to $63,000 in April 2021.
- Ethereum (ETH):Launched in 2015, this newcomer goes beyond cryptocurrency by bringing together blockchain’s other decentralized applications. It is a technologically advanced version of Bitcoin and is blazingly fast, taking just a few seconds to make transactions compared to Bitcoin, which takes a few minutes. Ethereum is currently the second-largest cryptocurrency in the world. It has a staggering $292.42 billion market capitalization and a market price of $2,532.10. In 2020, Ethereum started the year trading around $125 and climbed up to around $600, which is a 380% surge within just 12 months.
- XRP RIPPLE: Ripple was created as an alternative financial payment system to transform and facilitate cross-border payments. According to the report by OMFIF (Official Monetary and Financial Institutions Forum), Ripple, using its distributed ledger technology, offers solutions for five major issues: security, speed, traceability, cost, transparency and risk management. In 2020, the Ripple blockchain expanded to more than 300 providers across 40 countries, including Banco Santander (SAN), American Express (AXP), JP Morgan (JPM) and HSBC Holdings (HSBA).
- Polka Dot (DOT):Polka Dot’s unique component is its relay chain that allows the interoperability between other blockchains. It also allows for “parachains,” or parallel blockchains, with their native tokens for specific use cases. Polka Dot was created by Gavin Wood, one of the core founders of the Ethereum project, who had differing opinions on the project’s future. Its market capitalization was $11.2 billion in January 2021, which increased $40 billion by April, and its price increased from $12.54 to $43.86.
- Cardano (ADA): Cardano is another decentralized and open-source crypto. This cryptocurrency currently stands at $1.48. Cardano, a 3rd gen cryptocurrency, was created with the vision to create an “Internet of Blockchains.” It aims to be the financial operating system of the world by offering decentralized financial solutions for chain interoperability, voter fraud, and legal contract tracing. Cardano took just three years to hit a $47 billion market cap, one-third of the time it took Bitcoin. Within just three months, its market cap increased from $9.8 billion in January to $47 billion in April 2021, making it one of the top five cryptocurrencies.
Bitcoin’s upward trajectory elucidates the emerging revolution of cryptocurrencies, and it seems to be just the beginning. With more countries seeking to regulate the market, and institutional adoption, cryptocurrency’s growth is phenomenal. However, the volatility of Bitcoin and other cryptocurrencies is still proving to be a stumbling block to gaining mainstream acceptance. There is still a need to quash this volatility and stabilize these assets.