You may have noticed that cryptocurrencies have been a constant presence in the news over the past few years, gaining more popularity than anyone could have ever imagined. Bitcoin, the leader of the crypto market, has become one of the hottest investment venues for those brave enough to look beyond traditional asset classes, and although the current Bitcoin price is nowhere near the record highs it registered back in 2021 before the crypto winter set in, the coin is still going strong.
In an age where tech innovations rule the world, the rise of digital currencies shouldn’t come as a surprise. However, there’s no denying that crypto has had its fair share of challenges along the way, and is now facing intense scrutiny from lawmakers and a variety of other issues that are hindering its path towards mainstream adoption. As with all things that are new and unfamiliar, digital currencies sparked suspicion, doubt and mistrust when they first emerged on the financial scene, and there are still many skeptics out there who don’t believe in their utility.
Despite their troubled history, cryptocurrencies managed to distance themselves from their initial label as tools for speculation, and have come to be regarded as the future of money and an integral part of the modern financial ecosystem.
So, how did crypto thrive amidst all these adversities when it could have gone extinct a million times by now? As you may suspect, there are various factors that have contributed to crypto’s staggering rise to fame, and we’re going to explore the most important ones in this article.
A new playground for daring investors
Many analysts argue that it was the 2007-2009 global financial crisis that led to the creation of Bitcoin and all the other coins that followed. However, there’s no real evidence to back this theory. Indeed, Bitcoin aimed to propose an alternative to fiat money that could help fight all the inequalities and injustices caused by governments and central banks’ dominance and restore the power balance in the financial system, as mentioned in its white paper. But the concept was already in the works long before the financial turmoil turned into a full-blown crisis, so it was all probably just a matter of circumstances and favorable timing.
This also dismisses the idea that the crisis was what sparked people’s interest in digital currencies. The financial mess at the time may have had a small contribution to the phenomenon, but let’s not forget that by the time crypto became a thing, the crisis had already subsided and was no longer a main topic of discussion. Besides, people are quick to forget bad events, even those that affect the entire population of the planet.
A more plausible explanation for what happened was that investors discovered a brand-new asset class that promised to provide much higher returns than other investment venues. While traditional assets offered a diverse array of opportunities for building wealth, the returns didn’t satisfy investors’ appetite for performance, but crypto did. Due to their increased volatility and speculative nature, digital currencies soon caught investors’ eye. Their rapid appreciation and the intense media coverage they got over the years also increased their appeal as a store of value, and so the whole world became mesmerized with crypto.
Accessibility
If you want people to embrace a new product, you have to make it as easy as possible for them to reach it. No one would go to great lengths to try something they have very little knowledge about, as good as it might be, but they would be curious to give it a shot if it was easily accessible. That’s precisely what happened with crypto.
In the beginning, digital currencies could only be found on a few platforms that not many people knew about. It was therefore difficult for the wider public to come across these intriguing assets, so for a while they maintained a low profile, residing at the fringes of the financial system. In time, more crypto exchange platforms emerged, facilitating people’s access to digital currencies. A lot of them collapsed over the years, but many more came to replace them.
Even mainstream financial companies started including crypto products and services in their offering. As the number of brokers increased, bringing a wide range of tokens to traders’ and investors’ fingertips, crypto’s popularity started to rise.
Mainstream businesses and organizations took note of the increasing crypto demand and began accepting cryptocurrencies as a form of payment to keep up with customers’ needs and expectations, thus increasing their real-world utility and further fueling their popularity.
Governments are jumping onboard
The fact that digital currencies were largely ignored or rejected by governments around the world for a long period of time was a huge deterrent to widespread crypto adoption. However, that’s no longer the case as a great number of countries have reconsidered their stance on crypto, becoming more open to the idea of including digital assets in their financial structures. El Salvador and the Central African Republic (CAR) have even gone as far as making Bitcoin a legal tender.
Moreover, the governments that are still reluctant to crypto adoption and ban the use of digital assets on their territory are not turning their back on the concept. Instead, most of them plan to create their own version of digital currencies, also known as central bank digital currencies (CBDCs). Several countries have already announced that are working on these projects and are expected to release their CBDCs in the near future. All these developments have brought more legitimacy to the crypto space, strengthening people’s belief in crypto’s potential.
Final thoughts
Although not everyone is thrilled about the rise of digital currencies, there are plenty of reasons why crypto is still around after so many ups and downs. If this asset class wouldn’t provide any benefit or advantage to people, there would be no demand for cryptocurrencies. But as we’ve learned over the years, the crypto industry holds a lot of potential and we have yet to explore all the possibilities.
