First seen as an object of curiosity, cryptocurrencies have been recently gaining popularity. Financial experts and media are looking at these tokens backed by blockchain technology, as Bitcoin’s value has skyrocketed in the past few years.
In January 2009, when Bitcoin was launched, its value was close to zero. In March of 2009, it reached $0.003, then $0.01 and then in July 2009 reached $0.08. Two years after its creation, it finally reached the $100 mark, until its value exploded, reaching $19,000 towards the end of 2017. Over the past 2 years, the market has had ups and downs, however, in the past 24 hours, the value of the BTC has gone up 10% to its current value of $12,800.
Bitcoin has literally gotten out of control, and its high volatility has turned it into a double-edged sword: very interesting for investors but absolutely useless as a currency on a daily basis. This is why Bitcoin is a favorite of the media, but is not the token expected to replace any country’s currency.
The history of Bitcoin and its success are also embedded into the way it has been used. Even though the amount of transactions linked to criminal activities is not as significant as most people assume, the reality is still undeniable: the cryptocurrency has been repeatedly associated with drug sales, money laundering and illicit fund schemes, since sending cryptocurrencies is the most discreet way of online money transfers.
If this fact brought the token to light, cryptocurrencies are much more than that.
Ethereum, another major player in cryptocurrencies, is another blockchain-based currency. By linking its tech to a ‘smart contract function’, it allowed major companies to use it as a “third party” when they needed to perform complex financial operations. The advantages are obvious. By basing these financial transactions on blockchain technology, instead of a marketplace that would act as intermediary, companies avoid two problems: firstly, they don’t need to trust the company that runs the market, and secondly, they don’t need to pay any fee to the “broker” that runs the financial operation.
Do cryptocurrencies have an actual impact on financial markets? It depends on how you see it. For example, Bitcoins can become a safe haven asset, in case of instability, just like gold. When a financial crisis emerges on global markets, Bitcoin, Ethereum and other digital currencies such as the GMB token that provides an eco-system designed to facilitate trade, travel, and entertainment commerce.
Not convinced of the volatility of crypto currency? This is actually what happened -on a smaller level- in a plethora of South American countries. In Venezuela or Argentina, when the value of the local currency started to drop, many citizens were concerned about what would happen to their savings. Many saw cryptocurrencies as the best way to protect the value of what took them a life to put aside. By buying Bitcoins in their local currency before it plummeted, they literally used cryptocurrencies as a financial safety net.
Financial markets love new products. Cryptocurrencies fill in the gap that was needed for a decentralized value. If you want any proof of how the financial world needed crypto, just look at the current market value of Bitcoin, and compare it to what it was ten years ago.