Though it seems like we hear about cryptocurrencies in the news all the time now, the movement is really still in its infancy. It’s true that 2017 saw tremendous growth in the industry and crypto market cap, but the fact remains that still only a small percentage of the population owns any sort of cryptocurrency.
A Recent survey conducted in 2018 found that only 8% of Americans have invested in cryptocurrencies. 8% is definitely an increase compared to what it was in the past, but for those involved in the cryptosphere, it’s easy to get tunnel vision and only see the hype in the industry. Often times, crypto enthusiasts lose perspective on just how new the crypto economy truly is. But what’s holding it back and how does the industry go mainstream? Let’s take a look at a couple of the barriers to entry and how they can be remedied.
A key issue keeping many out of the industry right now is the lack of clear guidelines when it comes to regulation in the crypto economy. For the time being, there still isn’t a comprehensive plan enacted by any governing body establishing how cryptocurrencies are to be handled. American regulators are still working out which coins, if any at all, will be considered securities. and what the proper procedure will be for regulating them.
Similar to the United States, the European Union is still standing on the sidelines until a comprehensive plan can be developed and implemented. Without knowing what direction officials and regulators are headed in, many potential buyers are waiting in the wings as well. Without a clear indication of what the future of the crypto economy is going to look like, many institutional investors don’t want to accept additional risk by entering uncharted waters.
This barrier to entry has a clear solution: regulation. Though the word is disliked by the cryptocurrency community, the fact is that knowing the rules of the game is imperative before you can play. Regulation is bound to happen, the only question remaining now is what it will encompass and when it will be enacted. Once there are clear rules for how the industry is going to be regulated, there’s likely to be a large influx of investors coming to the legitimized markets. Regulatory concerns play a major role for institutional investors, but what are the concerns of people not worried about investment banking rules and regulations?
Liquidity and Usability
This is where issues around liquidity and usability come into play. For the average person interested in cryptocurrencies, one of the barriers keeping them out of the industry is not being able to really use the cryptocurrency they purchase. While there are some mainstream investors interested in day trading and investing in cryptocurrencies, most of the population isn’t interested in playing the markets; they’re interested in actually using the cryptocurrencies.
Though bitcoin was created to be a “Peer-to-Peer Electronic Cash System” , many aren’t able to actually use it in that way. Bitcoin’s being accepted by less merchants now, rather than by more, as transaction fees get higher and price volatility increases. While bitcoin isn’t the only cryptocurrency in the markets, it is the one most people are aware of. Without a legitimate use-case or liquidity, many won’t even get into the cryptocurrency markets to begin with. Clearly, the solution to the issue for this bottlenecking barrier of entry is to give regular consumers a viable option for using their cryptocurrencies to purchase goods and services.
Many services already exist for buying cryptocurrency using fiat currency and for converting cryptocurrencies back into fiat currency like the US dollar or euro, but this still defeats the purpose of a cryptocurrency if consumers need to exchange it back into fiat to use it. Right now, there are a few projects out there tackling this issue to bring more people into the markets.
Many services already exist for converting cryptocurrencies back into fiat currency like the US dollar or euro, but that defeats the purpose of a cryptocurrency if consumers need to exchange back into fiat to use them. Right now, there are a few projects out there tackling this issue to bring more people into the markets.
One of the projects in the space is Paxful, which has established a large online marketplace for consumers to buy, sell, and trade gift cards. Though the website doesn’t focus exclusively on cryptocurrencies, the p2p trading site’s accepted payment methods include bitcoin and Ripple’s XRP token. The site is working to alleviate part of the liquidity problem many cryptocurrency holders are experiencing by offering an additional outlet for holders to spend their cryptocurrency to get goods and services.
Another project tackling this space is Zeex which is proposing a solution of cutting out the middleman altogether. Instead of forcing consumers to trade their cryptocurrencies for fiat, users on the platform can purchase goods and services with cryptocurrencies directly via gift cards. Zeex is building a platform for consumers to easily use their cryptocurrencies to purchase gift cards from a variety of vendors without paying any exchange fees they would otherwise need for exchanging crypto to fiat. By creating a simple, easy-to-use system, the platform will help get less tech-savvy users on board. The simpler and more cost-effective the platform is, the more consumers will get involved.
By straightening out what the rules of the cryptocurrency industry are going to be in the future, institutional investors (i.e. “big money”) will be more likely to get involved. Additionally, once regular consumers get to see an opportunity to actually use cryptocurrencies, the industry is likely to see a significant influx of users and can truly go mainstream.