Good a thing companies are now venturing into investing in the cryptocurrency ecosystem not minding the volatility of some digital assets. A perfect example is the recent report of SkyBridge Capital, a $9.2 billion hedge-fund enabling itself to invest in the cryptocurrency industry, stating that it is not set to solely stake on Bitcoin, but open to the crypto sector as a whole.
As we know, investing in cryptocurrency is not similar to investing in other forms of asset. The high volatility, speculativity, novelty, spectacular challenges, valuation methods, technical due diligence, custody, and liquidity issues it crops up with are worth considering. Nevertheless, what could still be the motivation behind this growing adoption?
Increasing Adoption Rate
Interestingly, Africa is said to be having the second-highest adoption rate for cryptocurrencies as it has been on the rise. It is witnessing greater crypto ownership, trade volume and regulation. However, there is an increasing need that it explores beyond its shores and becomes more widely adopted. Although there are lots of hindrances towards it’s massive adoption as carefully highlighted above, there are still reasons that are capable of making it advance more than it’s already attained height. Some of these are;
Ease of Use
Cryptocurrencies have high adaptability to various modes of payment and transfer, and offer numerous advantages over cash and payment cards. It’s unique ability to adapt to varying needs of customers and investors is a plus that will keep ensuring it’s popularity in subsequent times.
The interesting fact that one can safely store assets or currency virtually is intriguing especially as it combats and helps one escape the traditional modes of banking systems. Cryptocurrency allows for this unique feature to both it’s users and investors. Funds or assets can be stored digitally with any wallet choice and one can be rest assured of it’s security even over a long term duration.
Cryptocurrencies are increasingly becoming the new digital gold, especially the BTC. They play a similar role in protecting investments against market crashes. Many investors are widely opting for this digital asset as their investment hedge as it could help whenever stocks are set for a downturn.
When asked about the possible reason behind the growing adoption of cryptocurrency investment by companies, Zhenwu Shi; founder at InfStones, a blockchain infrastructure company, states that; cryptocurrencies by their nature exist in a limited supply, and function as a good anti-inflation tool that are easy in storage and split and as such, advantageous to companies if adopted.
He further stretches that the cryptocurrency community is becoming more and more mature, and as long as the trend continues, with its underlying infrastructure remaining well built, more funds will keep entering the space.
From Shi’s point of view, the continuous participation of institutional investors is that there tends to be a reduction in the volatility of the market and this would help price stability in time. This stability in price is what will further increase the mainstream adoption of cryptocurrencies.
Meanwhile Saeed Alzahrani broadly classifies all likely motivation for the adoption of cryptocurrencies into four factors namely; The technical, social, economic and personal factors.
Heralding Implications of Technological Advance
Obviously, as a project advances, there is likely to be a need for certain technology to build up in order to serve the purpose for its creation. To this effect, there are constant build up of technologies today.
The crypto projects world has developed into two different categories. The first category is the currency path, such as Bitcoin and Litecoin. These are very stable, almost no upgrade in the software version. It is more treated as a store of value, so they’re not as susceptible to constant technological change. The second category is the utility token, such as Ethereum, and EOS. The majority of new projects fall into this category. If the foundations behind this project do not continuously improve their technology and upgrade to new software, these projects can be easily forgotten, which is the same as the regular companies. In this way it’s both a positive and a negative – those who can’t keep up with changing standards get left behind, but those who stay on top of changing technology are well positioned. In some way, this is a natural process for weeding out weaker projects,
Variance in Regulations
Generally, regulations differ or vary depending on the picture in question. They constantly differ according to personalities involved, the issue at hand, difference in governance, difference in constitution e.t.c
But this is definitely not so with digital assets. As it is, regulations are just between the U.S and some non-U.S. jurisdiction. Over time, there is a likelihood that regulations would circulate more and across various regions or jurisdictions thus making the system more susceptible to accepting larger investors into the space.
However, Shi believes that a large portion of cryptocurrencies are still controlled by a few big companies in the world, and in the long run, these companies may have excess control over prices, which is similar to the real estate problem in Hongkong. If it happens, it becomes totally against the original purpose of crypto currency, i.e. building a decentralized crypto currency system.
In time to come, adoption is likely to become massive by companies that invest in digital assets and this would be without restrictions of market capitalization, technological features, or even the novelty status of a crypto token.
We await more investments. As it is, the amount of funds yet to be staked on cryptocurrency or the larger picture is capable of taking crypto to unimaginable heights as such there has to be continuous efforts, stability and security to attract more investors so that growth can accelerate to the point of taking cryptos to an all-height.
Consequently, when this amiable height is attained, our hope today of a lurking financial boom someday, will be finally let loose.
Duru Joselyn is a content creator, writer, self development coach and news analyst. She specifically enjoys writing on anything pertaining to cryptocurrency and the blockchain industry. Joselyn is a fun loving Nigerian who not only has a flair for giving information updates; she also enjoys a variety of outdoor activities especially traveling and photography.