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Could bitcoin and cryptocurrencies really be the future of standard finance? Growing adoption and continued health of fundamentals say yes.
The crypto industry has been booming. While some would like to say this is a short-term bubble, those also seem to be the same people that promised us crypto would be extinct by 2018. The reality is that bitcoin has come back from every doomsday scenario it’s been given. From full on market shake outs, to seemingly stagnant corrections. Bitcoin, and other cryptocurrencies are here to stay, and currently the market is looking healthier than ever.
Understanding the bitcoin and crypto markets as a whole is no easy feat. New users can turn towards helpful exchange platforms like Bitvavo , as they learn to navigate the investment potential of this still nascent market. A few indicators are key to establishing the baseline health of bitcoin’s fundamentals, as well as the vitality of crypto markets as a whole. As the number of users continues to climb, we take a look at other key factors affecting the functionality of crypto, and what they mean to you.
Mining Operations and Health:
Few things are as telling about the health of the bitcoin market as mining and hash rate. Mining is the practice of verifying transactions and adding them onto the blockchain. Super computers that are associated with bitcoin’s network, called “nodes”, lend their computer power to the network by competing to solve complex mathematical equations.
The more computers on the network, the higher the hash rate, and the more secure the network is. Should one of these nodes be the first to solve an equation, the user is awarded a predetermined amount of bitcoin for their efforts. They also receive compensation through transaction fees.
While mining does indeed receive rewards, the process isn’t without cost. Specialized computer equipment and energy usage bills both account for the operational cost of mining. Maintenance and employee wages are also factored in. This can make it cost prohibitive for miners in certain countries where hardware and energy costs are high.
This makes mining costs closely tied to trade tariffs and the availability of cheaper or renewable energy sources. For the health of the network, it’s important that miners and nodes are ubiquitously distributed across the globe, with varied users. This is one of the hallmarks of what keeps bitcoin’s fundamentals decentralized.
General Crypto Compliance and Regulation:
In a recent University of Cambridge study, researchers have discovered that a number of crypto platforms are beginning to engage in governmentally sanctioned KYC (know your customer) protocols, so that crypto can more easily comply with local regulations. In the last two years, only 13% of platforms refuse to offer KYC, down from 43%. While this may be a bit of a bug bear for many staunch crypto “purists”, what it really shows is that crypto adoption is being opened up to include more clients from more areas in the world.
Positively showing that crypto exchanges are willing to comply with governmental regulations that are applicable to them. Which means that more people can adopt crypto and stay well within the letter of the law. Once again, suggesting that the average citizen is interested in investing in crypto. As more countries also adopt favourable legislation, it essentially green-lights the market for more people. Particularly those that hesitate to invest secondary to concerns over legality and safety.
Crypto Adoption and DeFi:
DeFi, or decentralized finance, has become the latest craze in crypto investment potential. With new opportunities and useful infrastructure on the rise, it has become an attractive niche for developers, financiers, and investors alike. As DeFi opportunities abound, familiar practices like lending and options arise. While these innovations present new risk to the market, they also create a place where legacy investors can bring their expertise. Creating new investment potential and innovative ways that HODLers can get their assets back into the working market.
These DeFi options also indicate a continued fascination for the cryptosphere, helping to promote continued adoption in the future. Creating a space for developers who hope to find funding for decentralized business ventures. DeFi has also created an important bridge between cryptos like bitcoin and ethereum. As one can be used to fund the innovation of the other. Which locks up a load of market liquidity and drives price caps up. Creating a healthier market for everyone, and solidifying blockchain technology for the future.
