In 2008, the global stocks markets unraveled. The markets which previously seemed unstoppable fell like a cliff. The market crash was attributed to the collapse of the housing market which investors were rushing to buy using risky debts. At the end, millions of people lost their jobs, some of the largest institutions went bankrupt, financial institutions were fined billions of dollars, and many people died.
The collapse of the financial market led to new global regulations to prevent another crisis. In the United States, the Dodd-Frank regulations were signed while the European Union started revamping its MIFID regulations.
However, another thing was happening behind the scenes. An individual or group of individuals wanted to fix the situation. They were fed up with the regulators. They wanted to bring power to the people by deregulating how the financial market works. Their technology, was called blockchain and their first product was bitcoin.
The earliest adopters for bitcoin was the dark web website known as Silk Road The site became so popular that every month, its transactions were more than hundreds of thousands of dollars.
Traders took notice of this innovation.
Since then, developers started to come up with their own cryptocurrencies and the financial market took note. Today, the blockchain technology is worth more than half a billion dollars. There are more than 1,300 currencies. The price of bitcoin, which was below a dollar a few years ago is now trading at more than $10K.
The surge in the cryptocurrencies leaves open an important question. Where does it all go from here?
One thing we have learned in the past year is how difficult it is to predict the future price movements of the cryptocurrencies. Every day, we read statements from leading economists and analysts about the coming fall. This has not happened yet.
What we know is that the blockchain technology is here to stay. In future, most problems we face every day could be solved by the technology. For example, the process of raising money for business is very complicated and expensive. The blockchain-linked method of raising funds known as Initial Coin Offerings has made it easy for people to raise money for their companies. While the process is not perfect, I expect it to continue to grow.
The second most certain thing we know is that some cryptocurrencies will collapse. As seen in this page, there are more than 1300 cryptocurrencies in the market. Since all of them want to solve the same problem, only the most recognized ones may survive. Therefore, we can expect that most of them, which may not exist in the coming years.
The third thing we are sure about is that the cryptocurrencies may continue to remain volatile until the time when a potential major crash happens. For now, we are at a phase when traders are buying every deep because they expect the price to move up. Ultimately, this trend will come to an end.
Fourth, we know that regulations targeting cryptocurrencies will come. The U.S is already coming up with those regulations. While they may hurt the industry in the short term, we know that it is impossible for the cryptocurrencies market to remain unchanged with these regulations.