Why do people like crypto?
2021 marked a rapid escalation in the popularity of cryptocurrencies, and this was largely fueled by the increased media attention that came.
You couldn’t go far without hearing about the skyrocketing value of Bitcoin, or the exciting potential for using blockchains in the DeFi (decentralized finance) space. Digital currencies had officially risen from their status as a speculative niche into the mainstream consciousness.
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Beyond the arena of financial trading, the underlying technology captured the public’s imagination in the form of NFTs (non-fungible tokens), in the concept of the metaverse, and in the practical realm of smart contracts. Cryptos seemed to be the wave of the future and their popularity snowballed.
All this attention “is going to continue to drive growth in the industry for some time now,” says Gemini’s David Abner. On the other hand, we know that the crypto market went into a downturn last year, especially from May when the TerraUSD stablecoin became unhinged from the US dollar.
Terra’s sister coin, Luna, then collapsed and a domino effect ensued. Later, there were some high-profile bankruptcies in the sector, including those of Three Arrows Capital, Celsius and FTX.
The reason behind the popularity of crypto
To what extent are the causes of the crypto boom still active? What has changed since 2022’s crypto bear market took hold? To begin answering these questions, let’s look at the reasons for the popularity of crypto in the first place.
Rocketing prices
At its birth in 2009, Bitcoin was worth just $0.0009, but by November 2021, it had nearly reached $69,000. Those involved in financial trading could not ignore the fact that in the ten years until March 2021, Bitcoin returned over 230%. Looking at a more recent coin, Shiba Inu, we saw the price of mushrooms rise by a surprising 45 million% in 2021.
The media’s incessant coverage of this kept it at the forefront of people’s minds. At the same time, crypto exchanges like Coinbase went public, cementing crypto’s status as a mainstream asset.
availability
Initially, crypto trading was something you could only do on a few specialized platforms like Robinhood, but over the past couple of years, more and more online brokers have emerged, simplifying and improving the trading experience over time.
The mere fact that it is now so easy, talked about and common to engage in crypto trading has contributed to its popularity. Even Fidelity – a respected name in traditional financial services – began offering Bitcoin as an alternative for its clients.
Payments
Aside from crypto’s appeal as a trading instrument, it also offers a unique way to pay for things. Currently, it is unusual to make everyday purchases with cryptocurrency, but an increasing number of merchants have agreed to accept it in the last couple of years.
The more this trend continues, the more crypto may be normalized as a payment method, especially since it seems to have the potential for special security features.
The Metaverse
Like cryptocurrency itself, the metaverse has changed, in recent years, from a fascinating prospect to a mainstream industry investing billions of dollars in development. Facebook renamed Meta Platforms to mark its devotion to the cause.
The potential is there to construct a virtual world where real world transactions are carried out. For example, loans, mortgages and banking services are all imagined to operate in a man-made digital world. The currency of choice in this world will likely be cryptocurrency, so it is assumed that the growth of the metaverse will go hand in hand with crypto adoption.
DeFi
DeFi presents the prospect of a blockchain-based network of financial transactions that avoids the need for banks, lenders and central governments. Like the metaverse, it is still in the development phase, but it gives people the ability to take full control of their finances, which appeals to many. DeFi uses smart contracts to take the place of the traditional intermediaries in the financial world.
Looking forward
It is true that some nations, notably China, have banned the use of cryptocurrencies in recent times, but Jerome Powell, the head of the US Federal Reserve Bank, clearly stated in 2021 that he has “no intention” to do the same.
On the contrary, as many analysts point out, the fact that the US government has recently put so much effort into outlining the right regulation for the industry indicates that it may have a bright future. Their attention is spent on ensuring the security of crypto as a trading instrument, but also on securing it against the designs of cybercriminals.
