Finance / Investing

Cryptocurrency continues to evolve amid tighter regulation

In recent years it’s become impossible for the finance industry and investors to ignore Cryptocurrency.

It has emerged as a new option for experienced investors, reshaping traditional finance in several ways. It’s not been without its challenges – such as the collapse of major exchange FTX – but despite its well publicised risks, it still offers alternative opportunities for experienced investors.

Below, we briefly explore where it’s come from, where it’s going, and what’s happened along the way.

Bitcoin’s beginnings

Some 15 years since its inception, Bitcoin is still the most famous and popular cryptocurrency despite a series of challengers emerging in the meantime.

It was designed as a decentralised, more transparent alternative to traditional banking amidst the 2008 global financial crisis. Today it remains a prominent financial asset with a range of applications, influencing many fintech and blockchain projects in its wake.    

Beyond bitcoin

As mentioned, many alternative cryptocurrencies – known as altcoins – have launched since Bitcoin’s introduction. Most attempt to distinguish themselves in some way, be it through their purpose or capabilities.

They typically fall into specific categories, including stablecoins, security tokens, utility tokens and meme coins. This diversity can benefit the portfolios of cryptocurrency investors, providing different types of exposure and spreading risk.

Cryptocurrency trading

Like stocks, currencies and commodities, cryptocurrency has become another asset class for traders to explore. Using a slick online trading platform, you can buy and sell different coins seamlessly as market conditions evolve.

Cryptocurrency trading tends to be more volatile than traditional markets and is not a place for novices or those seeking to make a fast buck, making it better suited to more experienced, knowledgeable traders.

Blockchain technology for wealth management

Blockchain technology is hailed as the backbone of digital currencies such as Bitcoin and altcoins. Its decentralised nature promises greater efficiency and security and lower costs in financial transactions, benefitting individuals and businesses alike.

For example, platforms built on blockchain technology can streamline global payment systems by eliminating intermediaries.

Initial Coin Offerings (ICOs)

ICOs are another form of cryptocurrency that certain growing businesses can utilise to raise capital and achieve their goals. It’s effectively another means of crowdfunding, revolving around the creation and sale of digital tokens which grant investors unique access to ongoing projects.

They’re particularly beneficial for funding blockchain projects that are tricky to finance through traditional means.

An evolving regulatory landscape

Regulation has been an ongoing challenge for cryptocurrency in the UK and beyond as adoption of digital assets has increased. While some see it as restrictive, others argue that comprehensive regulation from the Financial Conduct Authority (FCA) will help build confidence in the evolving crypto industry.

One focus area is better safeguarding digital assets in crypto wallets, which serve as the digital equivalent of traditional bank accounts.

As you can see, cryptocurrency is a broad topic with a wide range of challenges and opportunities. As distrust in traditional financial systems grows, it will be exciting to see how it develops in the coming years.

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