Here's why cryptocurrency could be the next big financial tool

Cryptocurrency is a virtual digital asset that works as a medium of exchange, using strong cryptography to secure financial transactions. Bitcoin was the first ever cryptocurrency and is also the most widely used. However, over time, Litecoin, Ripple, Ethereum, Zcash, Stellar Lumen, Tether have also gained popularity.

For a long time, being a virtual currency, crypto was viewed as an unsafe and unreliable asset and was in fact, banned in India under a circular by the Reserve Bank of India (RBI), which prohibited banks from dealing in the digital currency. However, in a major development, the Supreme Court has recently lifted the curb on the use and trading of the digital asset in India. This move is being seen as a major boost that could relax the norms for cryptocurrency trading in the country.

Cryptocurrencies leverage blockchain technology to gain decentralization, transparency, and immutability, which are its key selling points. Some other factors that go in its favour are the fact that the digital currency has a lower transaction fees for the online exchange of money, and provides increased protection from identity theft.

India saw the technology’s potential well before the Supreme Court declaration

In India, a number of startups based on blockchain technology have already found their footing, thanks to the government’s push in the form of initiatives like ‘Make In India’ and ‘Digital India’ campaigns. A major case study of the use of blockchain in documentation process was recorded in Guntur district of Andhra Pradesh last year. A number of farmers sold their farm lands to the government and the entire process of fixing the appointment through a government-run app and documentation was done in just a couple of hours, using the decentralized distributed ledger system of blockchain. This is just one of many cases where the technology has played a crucial role. It has proved its worth in areas of insurance, supply chain, civil supplies, land records, to name a few.

Blockchain technology is central to cryptocurrencies and the recent encouragement in the form of Supreme Court’s ruling in favour of it may translate into better business opportunities in the area of Tokenized Fund Transfer. According to industry experts, India holds the potential of becoming one of the biggest crypto markets in the world.

The birth of a new market

As per a reported survey by American multinational financial services, Fidelity Investments, institutional investors consider digital assets to be worthy of holding in their portfolios. Nearly 47 per cent of the people surveyed thought that it is worth investing in cryptocurrencies, and a growing number of investors are experimenting with them as an asset class.

Outside of India, cryptocurrencies are seeing a strong demand and greater diversity of client types, with more traditional investors entering the space. It is quite evident that institutional investors, who enter the market now, will have the early-bird advantage. The growth of crypto is comparable to the Apple stock in the 1980s. According to financial experts, those who bought shares back then and waited patiently through the 90s have accumulated enormous wealth. Well, cryptocurrency might just have the same fate, and those who can see through Apple’s success story will surely make the most of the growing opportunity associated with crypto.

Just like any other asset class, mainstream recognition of cryptocurrency will happen when institutional investors like banks and hedge funds enter the markets as well. Globally, it is being observed that the involvement of institutional investors is on a rise. Last year also saw Facebook creating quite a stir in the market with the announcement of its digital currency, Libra – the launch of which is planned sometime in 2020. Besides, a number of platforms have emerged in recent times to cater to the institutional investors community in the crypto space.

Established brands and names are entering the space

Names like Alluva, Fidelity Digital Assets, and Bakkt are already playing their part, and to bolster the trend there are renowned international universities such as Ivy League, Harvard University, Stanford University, and others who are investing in cryptocurrency.

Web app Alluva has emerged as one of the largest analyst platforms for a wide variety of asset classes, including cryptocurrency. It provides predictive insights that are critical for investors, highlighting whether to buy, sell, or hold assets based on the inputs of its analysts, and market movement predictions. The company incentivises users to predict price growth, and provides investors ‘crowdsourced’ data on the market sentiments.

The cryptocurrency industry is witnessing a positive trend with brands like Samsung, Starbucks, among others showing their support. Countries such as Ecuador, China, Senegal, Singapore, Tunisia have already issued their own cryptocurrency, and Estonia, Japan, Palestine, Russia and Sweden are looking to launch theirs soon.

Going forward, the adoption is only expected to increase and with big names attaching themselves with crypto, there is no doubt that the digital currency will become an integral part of the finance revolution in the world. The future for crypto is surely bright.

(This is a partnered article)