(Sponsored) In 2023, Bitcoin bounced back and, much to skeptics’ surprise, climbed higher and higher, reaching a yearly peak of almost $45,000.
If the flagship crypto can continue its rally in 2024, chances are it’s going to top the record established in November 2021 when it was trading at a whopping $68,789.
But the increase in the BTC price USD, as impressive as it might be, doesn’t solve all Bitcoin’s problems nor the challenges faced by the crypto market.
If that were the case, the crypto king would already be on par with fiat money, when in reality, Bitcoin and all the other digital coins that were inspired by it are still confined to the outskirts of the financial system.
So, what exactly is keeping crypto from achieving mainstream acceptance? Is it its novelty and the fact that the industry is still going through growing pains?
Or is it that traditional financial systems don’t have the necessary infrastructure to support such an innovative asset class? While the reasons are varied, it all comes down to crypto’s poor reputation in the end.
Digital currencies have struggled with reputational issues ever since they appeared on traders’ and investors’ radars.
This has hindered their growth and large-scale adoption. Bitcoin, as the first crypto to emerge on the public scene, usually conflated with the concept of cryptocurrencies, reflects this ongoing struggle the best.
But 2024 could be the year that Bitcoin and the altcoin pack finally clear their name and earn the legitimacy they’ve been chasing for so long.
Why do cryptocurrencies have a bad reputation?
Despite crypto’s growing popularity, a lot of people are still skeptical when it comes to these assets and focus more on their negative aspects instead of weighing both pros and cons.
So, if we want to get to the root of the problem, we have to look at the factors that caused digital assets to earn such a bad reputation in the first place.
Volatility has often been cited as the main reason for people’s lack of trust in digital currencies, and rightfully so.
With prices swinging between extreme lows and highs within a matter of hours, high market volatility has become a defining feature for crypto, acting as a repellent for many investors and making the adoption of digital assets as a form of payment extremely difficult.
However, crypto’s reputational problems run much deeper than price volatility. This longstanding issue can be traced back to three key factors.
First, we have the lack of trust from institutions that comes in direct contradiction with the growing interest in the adoption of digital assets from institutional clients.
Crypto is largely regarded as a promising asset class but it also exceeds investors’ risk tolerance.
Without support from large players, crypto can’t rebuild its image and push forward toward mainstream acceptance.
The second aspect that drives skepticism and paints crypto in a negative light is the valuation challenge.
The consensus is that crypto’s value derives from community involvement. In other words, if enough people believe that a digital asset is valuable and drive demand for it, then its price is going to surge.
This means there are no solid fundamentals that can help one determine the value of a crypto asset which creates ambiguity and fuels volatility.
Finally, there’s a disproportionate focus on cryptos’ speculative nature. Investing in crypto has often been compared to gambling given the high level of risk it involves and the uncertainty of the outcome.
However, one should not ignore the fact that all investments come with a certain degree of risk and the use of crypto as a speculative investment also depends on investors’ goals and strategies.
With the public discussion on crypto revolving around these three main topics, crypto has attracted a reputation as an unreliable and unstable financial tool, and none of the milestones it has achieved so far have helped shed off this image.
The events that can flip the script for crypto
Moving forward, what does it take for Bitcoin and the altcoins to rewrite the narrative and build trust and credibility with users?
According to experts, the crypto ecosystem can experience fundamental progress that might be put into motion by two decisive events.
The first is the approval of a spot Bitcoin exchange-traded fund (ETF). This year, several reputable asset management firms, including Blackrock, Valkyrie, WisdomTree, ARK Invest, and 21Shares, have submitted applications with the U.S. Securities and Exchange Commission (SEC) to launch spot Bitcoin ETFs.
The SEC has delayed decisions in this respect, but many crypto analysts and supporters are hopeful that several applications can receive the green light in January 2024.
This could serve as a seal of approval and encourage institutional investors to embrace crypto assets, therefore boosting crypto’s legitimacy.
The second development is represented by greater regulatory clarity for crypto assets and enhanced compliance.
So far, lawmakers from different countries have struggled to find a viable formula to regulate digital assets, which has resulted in a rather cumbersome process.
The Markets in Cryptoassets (MiCA) Regulation adopted by the EU in June 2023 proves that it’s possible for government agencies to come up with a comprehensive regulatory framework, and the SEC’s over 130 enforcement actions related to crypto assets in 2023 also suggests that the crypto ecosystem is becoming a safer and more trustworthy space.
These actions can contribute to the evolution of the crypto landscape, banishing common myths and misconceptions that have been plaguing this asset class and changing people’s perception of digital currencies.
Crypto has shown the world that it can thrive in the face of adversity and push forward against all odds.
Now, Bitcoin and Co. are standing on the brink of pivotal developments that can help the industry address its main challenges, leaving behind its troubled past and paving the path for a brighter future.