What does the future hold for cryptocurrencies?

While the digital currency sector has been growing inexorably for the last decade and institutional investors are now pouring en-masse into the market, this question may seem odd to crypto veterans. Yet, for novices and newcomers to this investment opportunity, it is a legitimate question to ask – do cryptocurrencies actually have a future?

To answer it, we first have to understand properly what we are talking about because cryptos are not just the latest trendy financial product that can be used for short-term speculation. They are currencies that share a lot of features with traditional fiat currencies, like the euro or dollar, but with the notable difference that they are digital and decentralised.

A cryptocurrency is fungible, divisible and transferable like any other money. You can swap them for other cryptos or fiat currencies and you can use them to buy groceries, goods and services on any number of websites with new sites accepting these currencies every day. With some crypto-assets, it is even possible to lend or borrow directly with them or even set up a long-term savings fund for retirement.

A cryptocurrency is clearly identifiable, often limited in supply and forgery-proof thanks to its highly-secure protocol (blockchain) which records the transactions of that currency. Its key differences lie in it being entirely digital, following the lead of many other goods that have already gone through the digitisation process, and being beyond the control of a centralised regulatory authority by using a peer-to-peer network.

All these characteristics have contributed to the extraordinary success of cryptocurrencies, whose prices have soared in recent years. The global value of the market has reached €2 trillion. The performance and momentum of this sector have piqued and continue to pique the interest of retail and institutional investors alike. Among asset managers, the largest names have entered into the market with sometimes colossal investments. This has led to a democratisation of crypto investments, while improving the price stability of these digital assets that were subject to extreme volatility for a long time.

It seems then that the future of cryptocurrencies is more than bright, and the outlook for future values by 2025, 2030 or even 2050 are extremely propitious. For example, some analysts believe more than one billion people worldwide will own some bitcoins in the 2030s, and its price could reach between $500,000 and $1,000,000 by then.

Today, the cryptoverse is witnessing an explosion of applications being set up within its ecosystem, which will enable these digital currencies to be used for everyday activities in the real economy. Nowadays for the general public, they can quickly and easily invest in cryptocurrencies and hold those assets securely. Crypto ATMs are also beginning to appear, shattering the idea that such coins are intangible and giving the final sceptics a means to touch their digital assets.

Elsewhere, online payment platforms allow transactions to be performed in Bitcoin and other cryptocurrencies. Ethereum has introduced new, exciting uses in the area of decentralised finance while non-fungible tokens (NFTs) can act as deeds to property (in the art world, for example). Finally, fundraising using cryptocurrencies is already a reality with Initial Coin Offerings (ICOs).

All signs are go! Yet, it is important to keep a watchful eye on certain changes that could impact the future of cryptos:

• More and more governments are seeking to regulate cryptocurrencies to fight illegal transactions and improve the protection of the retail investor. While the intention is laudable and would bring an extra layer of protection to savers while reassuring institutional investors, the structure of cryptocurrencies should remain decentralised as this is what has made the sector prosper.
• The carbon footprint of cryptocurrencies, especially those using the proof-of-work mechanism, is a sensitive subject. The mining carried out requires a large amount of computational power and thus energy. This energy cost negatively affects the profitability of operations as well as the climate from those extra carbon emissions. Fortunately, there have been welcome improvements to this area. Certain cryptos, such as Ethereum, are moving to proof-of-stake which will make the mining far less carbon intensive, while low energy-consuming methods are also beginning to emerge.

Investing: when is the right time? Which crypto is the right one for me?

It is extremely difficult to pinpoint the right time to invest. The simplest strategy is to do it gradually. For example, if you have €10,000 to invest, break this amount up into four tranches of €2,500 and invest one tranche each month over four months.

You can also opt for automatic purchases every week or month to help you build up a portfolio in cryptos. (Find out about our Recurring transfers)

In any case, you should have a long enough time horizon (about 4-5 years) to fully increase your chances that your assets will appreciate in value. And always invest knowing that it involves risks, which you can check here.

Lastly, if you are not sure which crypto-assets to invest in, you can look at our ready-made portfolios that suit different investor profiles.

The most promising cryptocurrencies of 2022

Today, there are a vast number of cryptocurrencies, thousands in fact! Each one has its own price, features and uses. From one coin to the next, their applications are not the same nor are their added value and utility. If you want to focus on the most interesting, Coinhouse has an article on its Top 10 cryptos.

Among this top ten, you will of course find Bitcoin, the forefather of the entire cryptocurrency market, which currently has the highest price and the largest market capitalisation. In second is Ethereum, whose blockchain is used for NFTs and decentralised finance. Thanks to its many applications, the future of this cryptocurrency seems to be also set in stone. Then there are another eight digital coins that you must know about!

Besides that, Coinhouse has also chosen the most promising cryptos for 2022, which includes stablecoins, like Tether, the rivals Ethereum and Bitcoin, as well as the most exciting decentralised finance applications.