With so many CFD traders opting to use cryptocurrency markets, it makes sense that there is a vested interest in the overall health of the sector. While there can be no denying that in the ten years since Bitcoin burst onto the scene, digital coins have had a transformative and revolutionary impact, there is still a long way to go before they become an integral part of day to day life for the vast majority of people.
With increasing usage volumes, comes greater opportunities for trade, which means that anyone involved in crypto markets will welcome a wider acceptance and higher profile for both the coins themselves and the blockchain technology that powers them. So, what are the main factors that can help the future expansion of crypto?
David Thomas, Director and Co-Founder of GlobalBlock, a London-based cryptocurrency broker, believes that there are four main factors that will define the future of crypto, namely education, application, security and regulation. The adoption of any revolutionary tech can be a long process or can capture the public imagination in a very short space of time — the way that internet-enabled smartphones took the world by storm is a perfect example of the latter.
Bitcoin has been a significant success as the ‘poster boy’ digital coin and is undeniably the most well-known, as well as being the first. Bitcoin expert Andreas Antonopoulos describes the crypto concept: “This is not just money for the Internet. This is a new Internet of money.” By that he means that although blockchain based coins are often thought of as individual currencies, they are in effect more like separate “open finance platforms”. The very basic misunderstandings of the whole cryptocurrency idea are perhaps the major stumbling block to wider adoption, which is why ‘education’ is the first factor Thomas singles out as being important.
“The simple fact is that the majority of the world still has no idea what Bitcoin or blockchain based technologies actually are, and this represents a real problem”, Thomas suggests. Furthermore, this extends to the way most people will choose investments, especially in terms of avoiding areas of which they have little or no knowledge.
Blockchain tech, cryptocurrency concepts and the way that they come together to create a viable new form of economic working may seem straightforward to those involved in any of the various industry sectors which now touch upon the inner workings. However, for the vast majority of the general public, there is still very much a ‘dark arts’ view of the sector, often as a result of the way in which it
challenges existing processes and the established way of doing things. Therefore, it is a key issue for the industry to work out how best to educate and inform, with the real trick being how to do that for people who aren’t actually interested in the first place!
Each individual needs to know that there are benefits derived from bothering to change behaviors. So, when customers can already pay for goods and services via a variety of existing digital means, whether that is debit or credit cards, PayPal or another platform, they need to believe that crypto will offer a viable and favorable alternative before they will choose to use it.
Therefore, application is a vital area that needs to be sorted before things can really move on. Broader adoption will rely in no small part on how the tech itself develops and how functionality improves. “It is estimated that the Lightning Network for Bitcoin will have the potential to process 1 million transactions per second, however, this is still theoretical at this stage as the network requires adoption for it to process transactions at that speed”, Thomas explains.
While Bitcoin and crypto in general still have a ‘wild west’ reputation amongst the wider public, sometimes due to the way ransomware and other cyberattacks usually demand payment in digital coins, the question of security will be a hurdle to adoption. There have also been headline stories of digital wallets being ransacked and funds lost from exchanges, although many of these go over the heads of the general public in terms of understanding the details.
Associations with money laundering and criminal activity don’t give a very good impression for the positive security aspects that are inherent in cryptocurrencies. Of course, these activities far pre-date the invention of digital coins, but once again it will fall to a well-balanced and supplied educational program to really redress the balance.
Regulation is a major talking point both inside and outside the crypto sector. Whether governmental level rules are put in place or institutional self-regulation somehow comes into effect, there is probably no getting away from the fact that in order to grow, the whole crypto sector needs to lose some of its current ‘lawless’ image.
Thomas points out: “There has been much speculation surrounding the approval of an ETF by the US Securities and Exchange Commission, which would bring inevitable mass interest to crypto and separately, the Financial Conduct Authority in the UK will be producing their first set of guidelines on the sector in the second half of 2019.”
“With these measures, blockchain and cryptocurrency immediately gains legitimacy in the wider market and will undoubtedly then result in affording better protections for the retail part of the market”, he explains.
Future for trades
If it is as straightforward as addressing the four points Thomas outlines, it seems perfectly reasonable to assume that crypto will grow and become truly mass market. For CFD traders, this will be good news, as increased volumes will mean more opportunities to trade, new coins will offer chances to get involved with volatile assets, and a higher profile will mean forex markets trading positions will increase too.
It’s rare that an investor can become involved in a truly new and revolutionary sector quite separate from any that has gone before, and for traders to be able to access markets that by their very nature of innovation are unpredictable and exciting. As these are all aspects that are likely to appeal to those drawn to CFDs as a financial tool, the connection between contract for difference and crypto is sure to grow along with the sector itself.