The Future of Crypto: Where’s the Crypto Market Headed?

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With a global market cap of over 800 billion, it’s clear that the future of crypto is more than a fad. While the overall crypto market may not be as big as the global stock market, it’s grown quickly since the release of Bitcoin in 2009. Today there are dozens of cryptocurrencies and multiple crypto exchanges you can use for trading.

Are you looking to begin your crypto journey? Or are you wondering if you should continue to invest in crypto? Either way, you may be wondering what the future holds. After numerous scandals in recent years and a recent drop in crypto value, many are unsure what’s in store for the crypto market.

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In short, the future is complicated and unpredictable. Here’s what you need to know about the future of crypto—we look at everything from future regulation to fads and scams.

Predicting the Future of Crypto: No Easy Task

First, let’s get the disclaimer out of the way: it’s impossible to know with 100% certainty what the future of crypto is in either 2023 or even further out. All investments carry some amount of risk, and crypto is no different.

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Read More: A Trader’s View of the Factors Affecting Bitcoin’s Value

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If you’re looking to invest in crypto, never invest more than you can afford to lose. Prioritize other investments, such as your 401K and an emergency savings fund, before you purchase any crypto.

As for crypto’s future, there are a few overarching trends and themes you can look out for that. Understanding these trends will help inform your investing decisions.

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Everyone Will Remember the FTX Crash

It’s impossible to have heard of crypto and not heard of the FTX crash. So here’s a quick refresher. FTX Exchange Founder and CEO Sam Bankman-Fried used customers’ investments as his piggy bank, which he then used for his wants. This included real estate investments, funding political causes, and funding startups through Alameda Research (FTX’s research arm)—among other things.

The funds of millions of customers went missing as Bankman-Fried bled the company dry. This resulted in a November 2022 bankruptcy filing for the crypto exchange and hedge fund. It started with Binance CEO Changpeng Zhao announcing that he would sell a substantial portion of FTT, FTX’s crypto coin. That led to many other investors desiring to do the same in a short amount of time. Essentially, it led to a crypto bank run, not too dissimilar to the bank run of the Great Depression.

However, FTX’s downfall was more than a bank run. Critical correspondence between Bankman-Friend and colleagues is missing. No financial statements were ever audited by outside sources, meaning there was no one to look over FTX’s financial statements objectively.

Its corrupt leadership and lack of transparency and accountability led to its bankruptcy filing, and Bankman-Fried’s arrest and extradition to the U.S. Attorney James Bromley, who currently represents the company, said it lacked corporate controls, unlike anything they had seen before.

Read More: Helpful Strategies To Start You On Bitcoin Trading Journey

FTX has made a permanent name in the crypto space, and it’s unlikely anyone will forget them anytime soon. Unfortunately, it’s not for the right reasons. It’s only natural to expect investors to be more cautious about future crypto exchanges and coins.

There Will Be Increased Regulation—County and Country

Unfortunately, FTX is only the latest crypto scam. First, there was BitConnect and BitConnect Coin, which turned out to be a Ponzi scheme. Before that, there was Thodex, the Turkish crypto exchange that shut down and whose founder disappeared.

The list of crypto scams and rug pulls goes on and on. With so many scams and so little oversight, greater regulation is needed. Expect greater regulation both abroad and in the U.S. Although the regulation of digital assets in the U.S. is still in its infancy, the Biden Administration has taken steps to create a federal framework for regulation. This includes regulating nonbank payment providers, tracking the environmental impact of digital assets, and combating illicit finance.

Internationally, additional crypto regulation may lead to outright bans. Some countries have outright banned cryptocurrency altogether. Egypt, Algeria, China, and Morroco are a handful of countries that have entirely outlawed it.

What’s likelier is that governments will continue to regulate how cryptocurrencies can be used and what kind of transactions are allowed. This extends to tax laws too. According to U.S. federal law, selling and trading cryptocurrency is taxable. However, if occur a loss instead of a profit, you can deduct the loss from your taxes.

As for broader recognition as an accepted currency, Bitcoin is only officially recognized in the Central African Republic and El Salvador. There’s been no indication it will receive official credit in other countries.

Exchanges Will Continue to Try to Limit Risk

Slippage is the difference between the actual price of a coin and what a trader expects to earn. Slippage is common when buying and selling crypto since the market moves quickly. Slippage can be positive or negative. Slippage is positive if the actual price is lower than expected when purchasing crypto. If the price of selling crypto is higher than expected, slippage is positive.

If the reverse is true for either buying or selling, then slippage is negative. Every crypto trader will have a tolerance for slippage. Crypto exchanges are noticing this and incorporating slippage tolerances and limit orders into their exchanges.

Read More: Important Factors To Consider When Buying Bitcoin

For slippage tolerances, exchanges may offer typical options such as .5%, 1%, or 3%. If your slippage exceeds your chosen tolerance, your trade will automatically be canceled, preventing loss. Some exchanges borrow the concept of limit orders from the stock trading world. Limit orders designate to only buy or sell at x price or better. Limit orders are popular because they prevent negative slippage altogether.

For the more risk-averse traders, limit orders allow them to hedge their risk while still investing in crypto. Exchanges can attract new and retain existing traders by offering both slippage tolerance and limit order options. If they don’t, expect traders to move elsewhere to exchanges with more options.

Check out this slippage crypto guide for a more in-depth explanation of crypto slippage, how it happens, and, more importantly, how you determine how much slippage you will allow.

An Increase in Adoption and Price Is Likely

There’s good news for the future of crypto: significant currencies such as Bitcoin will likely go back up in price. Last year’s failures, such as FTX shutting down, economic conditions, and global events such as the Russo-Ukrainian War, affected all traditional securities, such as stocks.

Crypto was no different, and the price often reflected the stock market. This indicates that many investors treat it similarly to stock. Looking solely at Bitcoin, it closed in 2022 at $16,547.50. That’s a far cry from its peak of almost $69,000 in November 2021.

However, as previously mentioned, crypto will likely come under further regulation. This can lead to a more workable system and a better infrastructure for investors, traditional banks, and consumers. Crypto is also very slow in processing transactions, with Bitcoin capable of a mere 7 TPS (transactions per second). This leads to a long wait time as pending transactions are queued for processing.

Cryptos such as Bitcoin was designed for use in daily transactions. Building out this infrastructure in a way that’s safe, secure, and accessible to the average consumer will lead to greater adoption. What can the average consumer currently buy with crypto? Since Bitcoin (BTC) is the most popular cryptocurrency, let’s consider what you can buy.

BTC can be used for live streaming services such as Twitch, as well as other services such as WordPress and Dish Network. ECommerce platform Shopify accepts Bitcoin, Ethereum, and other cryptocurrencies, provided you enable it via your shop’s admin page. Online electronics retailer Newegg accepts Bitcoin, Dogecoin, Litecoin, Ethereum, and other cryptos.

While there’s been progress regarding retailers who accept crypto, there’s still plenty of progress to be made.

Where Is Crypto Headed? Consider What the Future Holds

Predicting the future of crypto is no easy task. However, we can look at recent trends and news about the overall industry to predict where crypto is headed. That allows traders to make an informed decision about the crypto market and how they should invest in digital assets.

Exchanges will move to limit risk as governments worldwide will further regulate and tax crypto. Increased crypto acceptance and better infrastructure will lead to a rise in crypto prices. Overall, crypto still has a bright future. For more on cryptocurrencies and other technology trends, check out the rest of our site.