Sunday, August 21, 2022

The State Of The Crypto Market In 2022

The State Of The Crypto Market In 2022

Cryptocurrency has experienced a wild ride this year. In less than eight months, Bitcoin (BTC 0.94%) is down 70% from its all-time high in November 2022. Ethereum (ETH -2.57%) gained 78% of its weight over the same period. The turmoil also affected the stock markets, although the S&P 500 stock index (^GSPC -1.29%) lost only 22% of its value.

Bitcoin price data from YCharts

The markets took a big turn in June. Bitcoin and the S&P 500 posted double-digit gains from summer lows, while Ethereum is up over 70%. This rally may seem big, but remember that Ethereum is starting to recover from very low prices. Overall, Ethereum and Bitcoin are down over 60% from their highs in November last year.

An important part of the fuel entering the market comes from the economy. Inflation is rising not only in America, but all over the world. In addition, geopolitical tensions in Asia and Europe have further exacerbated the strain on supply chains and financial systems, which have already been hit by the coronavirus crisis.

However, there have been significant changes in the cryptocurrency industry in recent months. These developments will be of great importance going forward as crypto investors look forward to 2022.

United Nations guidelines

The United Nations Conference on Trade and Development (UNCTAD) sent mixed signals in its recent policy review.

First, the International Forum on Global Economic Development noted that cryptocurrencies present both opportunities and threats to the economy. In particular, developing countries should be wary of digital currencies. Cryptocurrencies provide instant access to modern payment systems, but their volatility also exposes crypto holders to the risk of sudden price changes. An unexpected drop in prices can ruin your family's finances if all your savings are invested in Ethereum or Bitcoin. When you extend this problem to the economy of an entire nation, the risks increase.

UNCTAD has also recognized the benefits of a global borderless payment system. Therefore, the Globalization Agency invited business leaders to come together and establish laws and regulations for cryptocurrency trading in a spirit of cooperation. Instead, the risky quality of cryptocurrencies should lead to improvements in traditional fiat currencies and legacy banking systems.

“It is argued that a national digital payment system serving as a public good could address at least some of the main reasons for the use of cryptocurrencies and limit the spread of cryptocurrencies in developing countries,” the report says. “Given the risk of a widening digital divide in developing countries, UNCTAD is calling on authorities to limit the issuance and circulation of cash.”

Many countries are exploring the idea of ​​legal tender based on cryptocurrencies.

El Salvador has been using bitcoin along with the US dollar since 2021. The Central African Republic followed suit four months ago by adding bitcoin as a digital alternative to the CFA franc.

El Salvador is building a new city based on the concept of bitcoin mining and funding this project with an existing digital wallet. In the Central African Republic, the government has launched a new blockchain network called Sango, which is backed in part by bitcoin reserves. Ironically, you can now become a citizen of the Central African Republic by investing $60,000 in Sango securities. Then, five years later, you'll get your Sango principal back with this new card.

However, these developing countries are struggling with the practical application of trust in Bitcoin. Digital payment systems are not yet widespread, and not everyone has the technology to fully use digital systems. The world is watching El Salvador and the Central African Republic solve their problems. So far the results are not great.

The central banks of Thailand and Australia are exploring digital currency solutions from central banks. These large economies must view the risks and opportunities of digital currencies on a different scale than the much smaller economies mentioned above. The lessons learned from all this early experience will help the rest of the world create better rulebooks.

Different countries make different progress

At the same time, more and more countries are creating a regulatory framework for mining, holding, trading and sending cryptocurrencies. In some cases, their new rules could lead to digital forms of legitimacy directly through bitcoin-backed fiat currencies, as in El Salvador or the Central African Republic.

For example, in early June, the European country of Andorra passed a cryptography law allowing the government to issue its own digital code. The landless country will not replace the euro with a bitcoin clone anytime soon, but these small steps could move it in that direction. In addition, the Andorran government officially considers cryptocurrency a form of currency, and not an investment asset.

In South America, the government of Paraguay has recently issued a large set of cryptocurrency regulations for a different purpose. The bills said little about considering cryptocurrencies like bitcoin as official currencies, but they paved the way for cryptocurrency miners to settle in Paraguay. The country has a lot of green energy generated by large hydroelectric plants in Usin and Itaipu. Using excess energy in bitcoin mining rigs could make economic sense. The country is currently exporting spare power to Brazil for dollars, making cryptocurrency mining a more viable option.

Is it the right time to buy cryptocurrency?

In the summer of 2022, the world is one step closer to globally viable digital currency systems. This work is necessary for everything from consumer protection to the self-interest of institutional investors, and it's okay if it takes time. After all, doing it right is more important than doing it quickly. Meanwhile, Ethereum will undergo a long-awaited “merger” process in September.

Overall, the reasons to be serious about investing in cryptocurrencies and tokens that are still cheap are piling up. Bitcoin and Ethereum seem like solid buys for now if you don't mind a bumpy road in the coming months. It takes time to create a stable, long-term regulatory system.

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