It seems like only yesterday that the first ever cryptocurrency, Bitcoin, made its big entrance on the financial scene, generating a host of different opinions. Many were reluctant about the project’s potential given that previous attempts at putting the concept of virtual money into practice didn’t lead to much. Others were a bit more hopeful and eager to jump onboard such an innovative initiative – among them, the lucky few who managed to make a fortune off Bitcoin mining and trading. But the vast majority kept a neutral stance, being content with standing back and watching how digital currencies would evolve from afar.
And here we are today, a little over a decade later, still talking about cryptos and, by all accounts, more interested in trading and investing in digital money than ever before. Cryptocurrencies are no longer on the fringe of the financial system but rather on the brink of mainstream adoption. So, the logical question is, what has happened in the meantime? What made people fall so deeply in love with cryptos that they’ve become such a huge part of our lives? There’s no easy answer to that; or better said, there are multiple answers, as a 2022 survey conducted by GOBankingRates reveals, each of them perfectly valid, so let’s take a minute to explore the reasons behind crypto’s rise to stardom.
The first big finding of the survey, which included over 1000 respondents, was that most crypto enthusiasts (about 83% of them) were quite new to the game, being involved in crypto investing for merely two years or less. However, their numbers continued to increase at a steady pace, fueled by a series of factors.
Spike in crypto prices
Much has been said about the advantages provided by crypto as an alternative to fiat money and its unique characteristics, such as decentralization, transparency, security, immutability or ease of transaction. But that’s not the first thing that caught people’s attention. The world became curious about digital currencies once they noticed that prices kept increasing and became aware of the huge return potential that came with trading crypto.
In the beginning, people were only interested in how to buy BTC, mostly because there weren’t many other options available besides it. But as the crypto market expanded, with new currencies being added over the course of time, their value became undisputable. And so, investing in cryptocurrencies turned into an increasingly tempting endeavor, despite the well-known risks associated with trading highly-volatile assets.
In their early days, trading cryptocurrencies was not an activity that was easily accessible to everyone. The emergence of a large number of exchange platforms changed all that, making it a lot easier for people all over the world to buy and sell digital assets with as little effort as possible. With greater convenience and accessibility came greater popularity. Right now, investors can choose from a wide variety of trading platforms that are becoming more advanced by the day and feature all the popular digital assets, ensuring quick and safe transactions.
Broader institutional adoption
One of the factors that have kept crypto on the outskirts of the global financial system, blocking the way to mainstream adoption, was the reluctance and, in some cases, direct opposition from world governments. Most countries weren’t exactly keen on introducing an emerging form of money that has only been around for a split second compared to fiat currency and didn’t enjoy a great reputation either.
However, it didn’t take long for governments to realize that cryptos were here to stay, so they adopted the if you can’t beat them, join them-attitude. El Salvador was the first country to take this path and recognized Bitcoin as a legal tender in 2021, and the Central African Republic followed suit. Other countries such as Cuba, Panama, Paraguay and Ukraine might make a similar move in the future. Even governments that are still not willing to embrace cryptocurrencies are now becoming more open to the concept, considering the idea of creating their own digital currencies. These developments have definitely infused more trust and legitimacy into cryptocurrency, which is exactly what some investors who were on the fence needed to finally dive into the crypto scene.
The rise of crypto in business
For some investors, the concept of digital assets was so far removed from reality that they failed to see how they would prove useful in real-life situations, so they refrained from partaking in something that was not going to bring any true value to the world. Their concerns were not entirely unfounded, given that many crypto projects didn’t have a use case for a real-world problem, so their value was disputable at best.
But over time, more and more businesses started adopting cryptocurrencies as a form of payment for all sorts of products and services, so lack of utility is no longer an issue today. Both consumers and investors benefit from these use cases, and obviously, this contributes to crypto’s growing popularity.
The expansion of blockchain ecosystems
Cryptocurrencies became known as an alternative method of payment and investment opportunity. But there’s more to these digital assets than meets the eye. Blockchain, the technology that underpins cryptocurrencies, has experienced significant advances in recent years, and it is said to lay the foundation for the next iteration of the internet, Web 3.0, and lead the way into the much-awaited metaverse where everything is interconnected.
Cryptos will play a key role in building the metaverse, so when the metaverse finally materializes, the popularity of digital assets will potentially skyrocket. For investors, this adds one more reason to include cryptocurrencies in their portfolios and prepare for the world of tomorrow.
Knowledge is power
Investing in cryptocurrencies, as appealing and rewarding as it may be, remains a risky activity. The one thing both newbies and seasoned investors can do to reduce these risks and increase their earning potential is to educate themselves on cryptocurrency matters and expand their knowledge on the topic. Doing proper research and staying up to date with what goes on in the crypto scene are the smartest things one can do as an investor.