Investment The formation and growth of these private currencies attributed to the public’s lengthy efforts to escape registration and inspection of resulting transactions.
Yet, as previously said, the usage of cryptocurrencies has prompted as number of concerns, including substantial daily price volatility,
money laundering and terrorist funding threats, financing criminal activities, financial fraud, and economic security issues.
Cryptocurrencies as Investment Vehicles: Crypto assets
Cryptocurrencies are financial instruments with distinct increased danger characteristics that may also be a used as a payment method.
Although detailed investment information is only available for the two most popular cryptocurrencies, Bitcoin and Ethereum,
more than 222 cryptocurrencies (out of over 1,300) have been a registered for initial coin offerings (ICOs),
with a total market capitalization of approximately US$250 billion between 2013 and 2017 (Fang, 36). (With the main share in Bitcoin).
Infrastructure finance, peer-to-peer (P2P) lending, and crowdfunding are all examples of uses for funds raised.
In terms of investors, anecdotal evidence suggests that most cryptocurrency investors are small-scale investors with a short-term investment horizon,
whereas the investor base was welly expected to expand to longer-term institutional investors after the December 2017 introduction of Bitcoin future contracts (Fang, 36).
Bitcoin pessimists were able to gamble against its values with the debut of Bitcoin futures, which resulted in a substantial price drop in 2018.
For investors, identifying, measuring, and obtaining instruments to control cryptocurrency risks,
particularly those related to price volatility and asset safety, remains a key difficulty.
Development of Appropriate DLT Is Critical
DLT’s advantages extend well beyond its use in cryptocurrencies to the rest of the financial system (e.g., of blockchain to Bitcoin).
The key benefits of this technology are that it ensures more openness and efficacy,
as well as decentralization by design (because the applications of this technology cannot be a brought under the control of governments).
Further improvements in DLT, particularly in digital identities and “smart” contracts,
will aid in the widespread use of cryptocurrencies as a cost-effective method of transactions such as payments, transfers, investments, trading, peer-to-peer lending, and crowdfunding.
Current Prospects for Cryptocurrencies
Cryptocurrency might offer an alternative to national currencies as a means of payment conducting transactions and as deposit of value, regardless of any rules which might have implemented.
The usefulness of cryptocurrencies, which varies widely between the numerous cryptocurrencies,
as well as the effectiveness of the underlying technology that will enable them,
will decide their pricing and, eventually, their survival. Even though the current use of cryptocurrencies is not as expected to pose any financial stability risks,
central banks and regulators have remained vigilant about the risks that may arise because of their evolving applications (Foglia, 21).
They are prepared to enact legislation to mitigate the risks posed by potential payment and clearing system outages, as well as transactions of dubious integrity.
At the same time, monetary authorities should make use of any modern technology that might increase the efficiency of existing payment and clearing systems,