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Did you know that as of February 2021, Bitcoin reached a market capitalization of $1072.21 billion? Or that blockchain will hit $23.3 billion by 2023? What's more, experts predict that the cryptocurrency market size will hit $1087.7 by 2026.
If these aren't attention-grabbing statistics, we don't know what are. Crypto banks remain on the rise, and traditional banking systems already feel the pain.
Today, 79 percent of Americans have heard of cryptocurrency. And a growing number have started investing in them. For example, the American cryptocurrency exchange, Coinbase boasts a verified user base of more than 56 million users.
How does this company compare to traditional banking institutions in terms of popularity? Let's consider the traditional investment management company Fidelity. According to its website, the company currently has 35 million user accounts.
Cryptocurrency banks are gaining on and even surpassing traditional banks. But will they overtake traditional institutions? Here's what you need to know.
Blockchain, AI, cryptocurrencies, machine learning. These terms continue to trend and with good reason.
We're in the midst of a significant financial transformation. The cryptocurrency market continues to drive these changes.
Each year, the number of cryptocurrency transactions rises. This fact lays to rest naysayers' original criticisms of digital currency as unnecessary.
The crypto market will grow at a whopping compound annual growth rate (CAGR) of nearly 12 percent through 2024. These figures have some people questioning the role of fiat currency.
While fiat currency has served us for millennia, we've also outgrown it. Cryptocurrency will permit technology to occupy a dominant role in the economy, providing stability, fairness, and accountability.
Traditional banking faces many challenges moving forward. Chief among these?
The inability to keep up with the speediness of crypto transactions. But the limitations on traditional banking don't stop there.
How fundamentally is cryptocurrency changing the fabric of the way we transact and invest? To answer this, we need to understand digital currency's origins.
If there's one thing the Great Recession of 2007 to 2009 has shown us, it's how vulnerable banking systems are.
When people worldwide realized how insecure these financial institutions could be, they started to demand change. Some individuals decided enough was enough. These individuals felt dissatisfied with the notion of turning over their life savings and assets to a third party for safeguarding.
They determined to find another solution. In the process, Satoshi Nakamoto invented Bitcoin.
This medium for daily transactions meant a way to opt-out of traditional banking infrastructure. Yet, no one could've predicted the shockwaves it would ultimately send through the financial world.
Consider this. In April 2013, Bitcoin sat at a value of $50 at its low point. Today, it hovers around the $40,000 mark.
Not only is this a difference of $39,950. It's a percentage increase of 79,900!
Sure, this trajectory hasn't always been solely uphill. The crypto market has seen some sudden and capricious turns over the years. But the overall outlook looks very promising.
What's more, who in the traditional banking system foresaw its meteoric rise?
What has contributed to the success of cryptocurrency banks and exchanges? A specter first raised by the Great Recession--the realization that banks could unpredictably go bankrupt.
But the advantages of digital currencies don't stop there. They come with other advantages over traditional institutions. These include increased flexibility and availability.
Traditional banks lack in both of these areas. Remember the old joke about "keeping bankers' hours"?
Bankers have never really gone out of their way to cater to consumers. And they haven't turned to tech to enhance customer service like other areas of the marketplace (e.g., retail).
To this day, you must make trips to the bank building to perform many transactions. Too many customers and too few operating hours mean long lines and dissatisfactory service. That's not a winning recipe from a user perspective.
The inconvenience of bank timetables aside, traditional enterprises have other bothersome aspects. Take, for example, their tendency to charge over-the-top interest rates.
Banks remain notorious for charging high interest on cross-border transactions. They do the same with mortgages and loans, too. These over-the-top interest rates have left customers desperate for other, better solutions.
Traditional banks were (and remain) hamstrung by policies, regulations, and interest rates. So, individuals have sought out more customer-centric approaches to finance. They've searched for ways to hold assets autonomously, ultimately leading to cryptocurrency.
Individuals such as Nakamoto recognized decentralized banking processes as an answer. Today, cryptocurrencies and the blockchain continue to wrest control from third-party organizations. In turn, this power gets returned to consumers.
Sure, this new system comes with risk. But it also features the promise of substantial rewards.
What has the traditional banking system ultimately bestowed the world with? A massive global debt system.
And the COVID-19 pandemic hasn't helped at all. According to MarketWatch, global debt now sits at $281 trillion.
For some perspective, consider these stats. During the Great Recession, the global debt ratio increased by ten percent in 2008. It increased to 15 percent in 2009.
How do these ratios compare to today? In 2019, government debt rose to 88 percent of the GDP. Today, it sits at 105 percent.
Put simply, many nations added nearly $11 trillion in government debt to counter the impacts of the virus.
Is it any surprise the Fed will consider a digital dollar this summer? This news comes to us via Federal Reserve Chairman Jerome Powell. Powell hopes for a broader conversation about digitized currency.
Unfortunately, their current thinking remains WAY behind the curveball. Their digital dollar won't be a cryptocurrency. It won't be decentralized, and it won't rely on blockchain technology.
In essence, it remains fiat currency in a digitized "suit." This tired concept proves antithetical to everything cryptocurrency stands for.
Some claim that creating a "digital dollar" will help poor Americans gain access to the banking system. But this stop-gap strategy represents little more than an economic band-aid.
That said, it shows us something. Banks see the threat of cryptocurrency and have launched lobbying efforts to slow these changes.
Many companies, including Mastercard and Visa, are also working hard to get up to speed. In collaboration with central banks, they're working towards system-wide compatibility with new cryptos.
What does all of this tell us? Crypto banks such as Crypto.com remain a significant disruptor of status quo financial institutions. As traditional banking continues to struggle, expect to see more significant disruption.
At this point, you're likely wondering how crypto banks compare to traditional banks? After all, the terms sound pretty similar. But consider this a linguistic flaw rather than an issue with the concept of crypto.
We use the word "banking" to describe many crypto enterprises. But we're speaking of processes rather than institutions. Crypto banking refers to how digital currencies get introduced into the market for exchange and transactions.
Think of digital currency banks as the platforms that permit crypto holders to make payments and store assets. Put another way, digital currency banks are really crypto apps.
These crypto apps represent alternatives to traditional banking systems. They provide users with secure digital wallets to hold their assets. They assist with transactions such as borrowing, lending, and storing (a.k.a. HODLing in crypto-speak).
Traditional banking systems are centralized institutions.
How does fiat currency get valued? Through regulations and the market. In other words, consumers have no control.
But cryptocurrencies remove middlemen. They make users the owners of their crypto assets. The cryptosystem eliminates intermediaries from the process of storing, lending, and authorizing transactions.
How do cryptocurrency values get determined? By supply and demand. Period.
Crypto banks, such as Coinbase, rely on blockchain technology. From peer-to-peer money to digital currencies, these systems circumvent traditional financial institutions. In turn, they give power back to consumers.
Ultimately, crypto banking represents a superior financial system. It proves fairer than traditional banking systems, which can be manipulated through regulations, etc.
Platforms like BlockFi give power back to consumers. They do this through bank-free methods of transferring ownership and wealth.
Crypto banks have a bright future ahead of them. These companies have yet to fully embrace security and safety regulations for mainstream acceptance.
Cryptocurrency is based on blockchain. The most immutable tech out there today, we expect to see great security innovation moving forward.
As consumers feel more assured of the safety of crypto, consumer adoption will skyrocket. Like a tsunami, this financial change can't be stopped.
Why? Because of the superior nature of blockchain and cryptocurrency.
What's the takeaway when it comes to crypto banks? Cutting out third-party banks and placing power back in the hands of consumers will continue to revolutionize the future of finance.
For these reasons, the cryptocurrency market will flip traditional banks. It's just a matter of time.
In the meantime, you owe it to yourself to get up to speed on cryptocurrency. Now's the time to get ahead of the learning curve and get on the road to greater financial freedom.
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