How cryptocurrency has already changed and what will happen to digital assets next

Crypto assets are beginning to confidently enter people's daily lives thanks to their integration into the traditional financial system. Why is this happening and what it can lead.

The massive adoption of digital currencies has accelerated significantly over the past year. Large companies have begun investing in crypto assets. And investment funds began to use digital currencies to hedge risks.

In its financial report on the results of the first quarter of 2021, Square indicated that investments in bitcoin brought it 222% of net revenue or $ 3.51 billion.The company bought cryptocurrency in October 2020 and February 2021. The largest holder of digital assets among public companies, MicroStrategy, continues to buy bitcoin. The company last the purchased first digital coin on May 13 for $ 15 million. Taking into account the last purchase, MicroStrategy owns 91.85 thousand bitcoins for a total of $ 4.6 billion. The average purchase price of digital coins is $ 24.4 thousand. It follows that investments in cryptocurrency brought MicroStrategy $ 2.2 billion.

Tesla also made a profit from the sale of bitcoins. At the end of March, the company sold 10% of its cryptocurrency for $ 272 million. The deal brought the automaker a profit of $ 101 million. Tesla invested $ 1.5 billion in Bitcoin in February of this year and even allowed it to buy ts electric cars with digital coins for a while . However, then she decided to temporarily abondon this.

Cryptocurrencies have already begun to be introduced into the traditional financial system. For example, Goldman Sachs was the first among the largest US banks to creta a department for trading digital assets. The new department has already successfully traded two types of bitcoin-related derivatives. In the coming months, clients of hundreds of small American banks will be able to buy, sell and store cryptocurrency thanks to NYDIG and Fidelity National Information Services, which have partnership agreement. Moreover, this year, traditional investors have the opportunity to trade Ethereum and 1/10 bitcoin futures on the CME Chicago Mercantile Exchange

Amid the popularity of cryptocurrencies, the total cryptocurrency market capitalization exceeded $ 2.5 trillion, according to CoinGecko. According to a survey cryptocurrency exchange Gemini, 14% of Americans already hold digital currencies, and this figure may double by the end of the year.

The beginning of the road to acceptance

The arrival of institutional investors in the crypto market helped digital money to strengthen its position in the field of financial instruments, explained Nikita Soshnikov, director of the Alfacash cryptocurrency exchange service. According to him, there is now an avalanche effect, when several large players in the financial market announce the creation of cryptocurrency products, and their actions are pushing other players in this market to create their own cryptocurrency products or invest in existing digital assets.

“But there is still a long way to go before the massive adoption of cryptocurrencies. Ordinary investors still have little understanding and knowledge about cryptocurrencies and the possibilities of investing in them, ”the expert noted. The crypto market is at the beginning of the road to mass adoption, although it has made a colossal leap forward in recent years, says Nikita Soshnikov.

Comparison with Fiat

Cryptocurrencies are increasingly entering the world of traditional finance, and although the adoption of digital assets is rather slow, we are seeing both an increase in the interest of institutional investors and a gradual strengthening of confidence in the infrastructure of cryptocurrencies in society, said Yuri Mazur, head of data analysis at CEX.IO Broker. He expressed confidence that cryptocurrencies have become an additional analogue of traditional financial market instruments such as stocks and gold.

To equalize with fiat assets, it is necessary not only to be recognized by society and business, but also by states, the analyst said. In his opinion, there are difficulties in this matter, since states have all the power of regulation: from verbal interventions to claims of regulators against the creators of cryptocurrencies.

“Most likely, these difficulties will eventually be overcome under the onslaught of the increasing spread of cryptocurrencies as a means of payment,” said Yuri Mazur.

Integration with the traditional market

The crypto market is developing towards integration into the existing financial system with a possible subsequent change towards greater decentralization, says the director of the cryptocurrency exchange service Alfacash. In his opinion, earlier these were two different worlds - traditional financial instruments and an alternative decentralized system, but their mutual movement towards rapprochement and integration with each other is already observed.

“I think that cryptocurrencies will first integrate into the existing financial system, and then, from the inside, they will essentially reformat it and make it more balanced, decentralized, less vulnerable to many risks,” Nikita Soshnikov predicted.

Many people often talk about the high volatility of the cryptocurrency market, said Gleb Kostarev, director of Binance in Russia and the CIS. According to him, the market is volatile, but traditional markets are subject to volatility no less than cryptocurrency ones. In the future, this figure will certainly decline, he is sure.