3 things that need to happen for crypto to come back

Ah, the wild and woolly world of cryptocurrencies. It’s a place where fortunes are made and lost faster than you can say “blockchain.” The cryptocurrency market has taken quite a tumble from its peak in late 2021. Here’s how some of the biggest and most popular names in crypto have fared over the past year or two:

Data from CoinMarketCap at 10 a.m. ET March 7, 2023.

Some of the reasons for these dramatic price drops varied from coin to coin, but they have some headwinds in common. The cyclical nature of the crypto market results in wide ebbs and flows in value, and you could describe today’s environment as a long crypto winter. Furthermore, many investors have lost faith in crypto as a valid asset class due to the series of scandals and financial meltdowns in the sector in 2022.

But fear not, dear reader. I am convinced that digital currencies and blockchain networks will change financial systems on a global level in the next decade or so. As long as the long-term investment thesis holds water, I have some ideas about what could push the staggering crypto prices into their next rally.

1. Cryptocurrency regulations matter

First, governments need to put in place some stronger regulations for the crypto business.

Of course, that can be a tough pill for many crypto fans to swallow. You might think that regulations kill innovation. They stifle the free market. They give more power to the government and leave less control in the hands of ordinary citizens. So more regulation must be bad for the cryptocurrency market, which is built on the ideals of individual freedom, less government influence, and more financial innovation.

But listen to me. Things are different in these early days and cryptocurrencies need a lot of responsibility and structure.

When it comes to cryptocurrencies, we are still dealing with a wild west of an industry, with little oversight and many dubious characters. Crypto investors have learned this lesson the hard way through repeated cash-strapped events like the FTX bankruptcy, the Terra Luna disaster, and Kim Kardashian’s crypto endorsement.

If the crypto community wants to attract deep-pocketed institutional investors, it needs to work within a more investment-friendly legal and regulatory framework. Say what you will about regulatory overreach or taxes, but proper regulations will allow institutional investors and others to safely put their money into this sector.

And what holder of tokens doesn’t want more big money flowing into the cryptocurrency market?

2. The rise of decentralized finance

Now let’s consider the growing interest in decentralized finance (DeFi) and Web3 applications. This is where the real magic will happen.

We are talking about a new paradigm in finance, one that is decentralized, trustless and open to everyone. Layers of intermediaries such as banks, insurance agents and payment processors are being replaced by automated cryptocurrency systems. Fewer hands will reach into our pockets for a portion of each transaction. Money transfers will go faster, fees will shrink, and the financial system as a whole will soon become far more efficient. Who wouldn’t love the idea of ​​decentralized finance?

With the rise of DeFi platforms and applications, we are seeing the emergence of a new type of financial ecosystem, one that is run by the people, not the banks. And with more developments in this area, we can expect to see serious innovation and growth in the crypto market.

And ultimately, the only legitimate reason for token prices to rise is a corresponding increase in demand for them. Blockchain and crypto ideas will soon wither and die if no one wants a better financial ecosystem. However, I guess the world is hungry for a new deal, which should have a positive effect on crypto prices in the long run.

3. The Bitcoin “halving” and other technology improvements

And last, but certainly not least, we have the unstoppable development of technological progress. Last year’s big event was Ethereum’s Merge. Next up is the fourth Bitcoin halving, scheduled for spring 2024. The number of Bitcoins that miners receive as a reward for validating transactions on the network will be halved (again), greatly reducing the supply of new coins entering the market. In the past, that has tended to result in higher prices in the months that follow.

Take, for example, the halving in 2016. It was followed by Bitcoin’s 360% or so price rise from a modest $650 to nearly $3,000 in less than a year. Similarly, the halving in 2020 preceded a price jump of about 520% ​​from $9,000 to $56,000 in a year. There are no guarantees that the next halving will drive Bitcoin prices higher to that extent, but Bitcoin’s price chart should take a similar shape in 2024. History doesn’t repeat itself, but it often rhymes.

And let’s not forget other technological improvements in other cryptocurrencies. We are talking about faster transactions, increased security and more use cases. The merger was just a stepping stone to further improvements for Ethereum. Solana stabilizes the network structure. Shiba Inu introduces the Shibarium network, increasing the cryptocurrency’s transaction speed and data-crushing scalability. Even the rogue Dogecoin community is working on an ambitious list of platform improvements. You can teaching an old dog new tricks, after all.

This category matches the last one, as better technology simply helps these cryptocurrencies build better DeFi and Web3 systems. Higher demand for crypto will follow and then prices will go up. That’s the deal, as long as I’m not completely wrong about cryptocurrencies holding the key to a better financial future.