The future of cryptocurrencies will include risks and opportunities. As we mentioned at the beginning of this chapter, there’s a chance the price of bitcoin will plummet to $0.25. There’s also a chance the price of bitcoin will rise to $1 million.
If the cryptocurrency industry is going to succeed, then it’s going to have to avoid risks and embrace opportunities. Here are some of the risks and opportunities facing the cryptocurrency industry in the future:
Government Regulations and Bitcoin
Risk: Governments Will Ban or Heavily Regulate Cryptocurrencies
Governments are well-aware of cryptocurrencies. Some governments have already regulated bitcoin and cryptocurrencies. China, for example, banned bitcoin trading in September 2017 and shut down bitcoin exchanges countrywide. Today, cryptocurrency continues to be a grey area in many jurisdictions. Most governments agree that cryptocurrencies aren’t securities. However, they’re not treated like currencies either. Eventually, major governmental institutions like the US SEC are going to announce regulations on cryptocurrencies – and these regulations could decide the future of crypto.
Opportunity: Regulated Cryptocurrencies Could Become Legal and More Widely-Accepted
Regulation isn’t necessarily a bad thing. Governments introduce regulation to protect citizens. Stricter regulations in the cryptocurrency industry could enhance the industry’s reputation. It could lead to a reduction in scams. It could help investors avoid ICO fraud. It would allow the highest-quality cryptocurrencies to rise to the top – at least in theory.
Risk: Tax Evasion and Money Laundering Will Force Governments to Shut Down Cryptocurrency Trading
The crypto industry is filled with money laundering, price manipulation, tax evasion, and other activities that governments can’t tolerate. Eventually, governments worldwide could put their foot down and end crypto trading.
Opportunity: Governments Could One Day Let You Pay Taxes in Crypto
It’s not unreasonable to assume that governments could one day embrace crypto – even to a point where you can pay taxes in cryptocurrencies. In February 2018 Arizona Senate passed a bill to Accept Tax Payments in Bitcoin.
Public Perception of the Crypto Industry
Risk: Cryptocurrencies Will Never Be Mainstream Because of Negative Public Perception
When you mention “cryptocurrencies” to the average person on the street, you’ll get a range of responses. To the average person, however, bitcoin is often associated with the dark web, internet scams, online drug deals, and anonymous transactions. Despite the fact that bitcoin is one of the least anonymous cryptocurrencies, it still has a reputation for being linked to shady online activities. There’s a risk that bitcoin and cryptocurrencies will never get past this reputation.
Opportunity: Cryptocurrencies Will Grow Into a More Positive Reputation
On the flip side, there’s a chance public awareness of cryptocurrencies will continue to grow, and that the public will learn that cryptocurrencies have enormous value outside of anonymous transactions and money laundering.
New Technologies Will Impact the Crypto Community
Risk: Future Cryptocurrencies Won’t Be Based on Blockchain Technology
When we talk about cryptocurrencies today, we’re talking about digital tokens built on blockchain platforms. Bitcoin introduced the idea of a blockchain, and other cryptocurrencies have expanded on that idea. But blockchain technology isn’t perfect. There is room for improvement. Directed acyclic graph (DAG) algorithms could introduce a new wave of digital currencies, for example. It’s naïve to assume that blockchain, a 10-year old technology, will be the king for years to come. A new technology could make cryptocurrencies a forgotten fad overnight.
Opportunity: New Technologies Will Allow Cryptocurrencies to Continue Growing
New technologies will be good for the cryptocurrency industry. New technologies – whether they’re DAG-based platforms or whatever – will enhance the usability and efficiency of cryptocurrencies, opening up crypto to a new world of investors.
Risk: Electricity Consumption on the Bitcoin Network is Unsustainable
Bitcoin is notorious for its electricity consumption – and the problem continues to get worse over time. Electricity consumption on the bitcoin network – and other PoW networks – is unsustainable. There simply isn’t enough electricity in the world to continue providing the bitcoin network with the power it needs. In a world increasingly aiming for sustainability, the excessive consumption of the bitcoin network might be its worst enemy.
Opportunity: ASICs and Other Devices Make the Bitcoin Network More Efficient Than Ever
Electricity consumption of the bitcoin network has steadily increased over time, but efficiency of the network has also increased. Devices like ASICs are thousands of times more efficient than the miners we used during the early days of bitcoin. They spend less electricity to deliver higher hashrates.
Centralization in a Decentralized Ecosystem
Risk: Cryptocurrency is Becoming Too Centralized
Five bitcoin mining pools in China control the vast majority of hashpower on the bitcoin network. A handful of centralized corporations play an increasingly dominant role in the bitcoin network. Bitcoin mining used to take place on individual PCs. Now, it’s taking place in enormous data mining centers. The cryptocurrency industry is becoming too centralized – and this centralization could ruin the crypto industry as we know it.
Opportunity: Competition Will Reign Supreme
The crypto industry is very competitive. There are low barriers to entry. Any computer programmer can introduce a cryptocurrency online today. Someone might introduce an ASIC-resistant, centralization-resistant cryptocurrency that works in true, democratic fashion. The market might solve all of the problems faced by the bitcoin industry.
Risk: Quantum Computers Will Make PoW Systems Obsolete Overnight
Cryptocurrencies – particularly cryptocurrencies that use Proof of Work algorithms – are based on the concept of computers doing “work” by contributing processing power to the network. Moore’s Law has kept the increase of processing power relatively stable over the years (processing power has roughly doubled every year). Quantum computers, however, will blow Moore’s Law out of the water. The first person to build a quantum computer will be able to decimate PoW algorithms, threatening the security and stability of cryptocurrencies.
Opportunity: We’ll Build Algorithms for Quantum Computers
If and when a quantum computer gets developed, the market could build algorithms resistant to quantum computers. In fact, some cryptocurrencies today are designed specifically with quantum-resistance in mind. Quantum computers may be an issue for older cryptocurrencies, but it’s an issue that can be solved.
Risk: The Power Grid Collapses
If the power grid collapses, then bitcoin is dead. In an apocalypse-style scenario, bitcoin will not be a replacement for gold bars or cash. It’s an electronic form of cash. It only works with electricity.
Opportunity: We’ll Always Have Cold Storage and Paper Wallets
Bitcoin is useless without electricity. You need electricity to process transactions on the bitcoin network. However, we’ll always have paper wallets and other unique solutions. You don’t need electricity to store bitcoin long-term, but you’ll need electricity if you ever want to access that value.
Top 5 Bold Predictions for the Future of Cryptocurrencies
Wall Street Will Continue to Embrace Cryptocurrencies, But It Won’t Cause Prices to Skyrocket
Major Wall Street firms continue to embrace bitcoin and other cryptocurrencies. Eventually, these firms will offer cryptocurrencies to customers or open their own trading desks. Despite this development, however, it won’t cause prices to skyrocket across the market. As big-name investors continue to participate in the industry, it will cause markets to stabilize. Price manipulation will be reduced. There will be a small number of regulated crypto exchanges as opposed to hundreds of smaller, unregulated exchanges.
Bitcoin Won’t Be The Number One Cryptocurrency by Market Cap by the End of 2019
Bitcoin has been the world’s largest cryptocurrency since launch in 2009. It has never been surpassed at any point in its history. However, the dominance of bitcoin continues to decline. Eventually, bitcoin will be replaced as the world’s largest cryptocurrency by market cap. Ethereum and Bitcoin Cash are potential contenders, but a new cryptocurrency could emerge that topples Bitcoin completely.
Bitcoin Cash Will Eventually Be Worth More Than Bitcoin
Development on bitcoin (BTC) has stagnated over the past year. Developers are struggling to come up with a scaling solution. Transactions are piling up, transaction times are lengthening, and fees are rising. Today, BTC’s scaling solution is to implement an off-chain payment channel called the Lightning Network. It’s a complete (and deliberate) departure from the protocol mentioned in the original bitcoin whitepaper. Eventually, we believe that Bitcoin Cash – which has implemented efficient on-chain scaling based on the terms of bitcoin’s original whitepaper – will surpass bitcoin in value and market cap.
Bitcoin Will Never Rise Above $20,000
Bitcoin surged to an all-time high just under $20,000 in December 2017. Since then, bitcoin has plummeted as low as $6,500. While some experts claim bitcoin will be worth $50,000 or $100,000 within the next 2 to 5 years, we’re going to make a bolder prediction: bitcoin (BTC) will never rise above $20,000.
The Total Crypto Market Cap Will Surpass $1 Trillion By Mid-2019
The total market cap of the cryptocurrency industry sits at around $350 billion as of June 2018. The market cap climbed as high as $800 billion in January 2018. Since then, however, prices have plummeted and billions of dollars have been wiped from the market. Nevertheless, we believe crypto markets will rebound, surging to a value of $1 trillion by mid-2019.
Nobody knows what the future holds for cryptocurrencies. That’s what makes it so intriguing.
There’s a reasonable chance that bitcoin will eventually be worthless. There’s a possibility that nobody will recognize names like Litecoin, Ethereum, or Bitcoin Cash by the time 2050 rolls around.
There’s also a chance that bitcoin could be worth $1 million by 2025. There’s a chance that you could kick yourself for not buying bitcoin in June 2018 when bitcoin was only $7,000.
As with anything in life, we just don’t know what the future holds – and that’s what makes the crypto industry so exciting.