Does Cryptocurrency Posses Potential Threat to Financial System?

By  //  June 29, 2022

The nature of cryptocurrency has always been volatile. Since its inception, it has had numerous price fluctuations. The most delicate illustrations of how much volatility there is in cryptocurrency are some recent incidents from the past. For the first time in ten months, Bitcoin fell short of the $30,000 mark on May 11, 2022.

In addition, the total value of the crypto market fell short of $800 billion. Apart from this here you will get complete information on how to make money with Bitcoin in 2022.

These roller coaster rides have made investors lose faith in the market; nonetheless, despite the abrupt fluctuations, there is no doubt that the crypto market is instead expanding. The more the market expands, the more concerned the existing financial market becomes.

Cryptocurrency Market

According to CoinGecko, Bitcoin, the most well-known and widely used cryptocurrency, reached an all-time high price of $68,000 in November 2021. This impacted the overall value of the crypto market, which peaked at $3 trillion. However, this high pricing did not last long, as it dropped to $1.51 trillion in May 2022.

The current market capitalization of Bitcoin is $600 billion, whereas the market capitalization of Ethereum is $285 billion. With these growing numbers, there is no doubt that the cryptocurrency market has expanded and grown rapidly, but it is still not large enough to replace the existing financial system.

On the other hand, markets such as the US Equity and the Securities Industry in the United States are valued at $49 trillion and $52.9 trillion, respectively. These figures were reported by the end of 2021, indicating that, in comparison to other markets, the crypto market is still developing and has yet to hit the ‘large’ trading level, particularly in the United States and other economic hub countries.

The Ratio of the Use of Cryptocurrencies

Individuals started to use the Bitcoin Trading Platform as it helped use cryptocurrencies to sell and purchase products. However, when Bitcoin became more popular and individuals saw it as a more beneficial aspect, many other cryptocurrencies emerged. People began to take an interest in cryptos, and banks, exchanges, corporations, and other financial organizations followed suit.

According to Coinbase, one of the largest crypto exchanges in the world, the data available to differentiate between investors and retail is quite restricted. However, according to the platform, 50% of investors and retail users possess crypto assets on the platform. This demonstrates that the proportions are equal, and both investors and retail customers are interested in cryptocurrencies for their own interests. 

Furthermore, the platform claims that there has been a massive increase in crypto trading since 2020, with the platform jumping from $120 billion to $1.14 trillion (2021). The displayed number reflects an increase in clients interested in cryptocurrency trading.

Bitcoin and Ethereum are two of the most popular cryptocurrencies among investors. According to a study done by the NBER, 10,000 bitcoin investors control nearly a third of the bitcoin market. The study also found that 1000 bitcoin investors collectively control about 3 billion bitcoin coins.

According to a survey released by the University of Chicago, 14 percent of US people have already invested in crypto assets by 2021.

Cryptocurrency Posing Threat to Financial System?

Although the crypto market is currently small and expanding in comparison to other large markets, it has the potential to represent a threat to the current financial system.

With the present financial system making it difficult for individuals and businesses to expand, cryptocurrency has given them the ability to break through barriers and explore their alternatives without worrying about transparency or security. However, this has initially alarmed banks and other financial institutions concerned about cryptocurrencies and blockchain replacing existing financial systems.

Apart from retail opportunities, cryptocurrencies are also gaining traction in the investment world. The well-known sharks in the investment sectors are attempting to increase their number of crypto assets, while newcomers are not far behind, as they are also prepared to invest some money and keep their tokens until they see a positive return.

People are currently using cryptocurrencies for sales, purchases, finances, investment, and other purposes due to this overall circumstance. Given its widespread adoption, the crypto sector poses a significant challenge to the current financial system, and we may see cryptocurrency take over in the future, as individuals, institutions, and businesses have already begun to do so.