Cryptocurrency: lives or dies? Part 2. Political and economic trends

Part 2. Political and economic trends in favor of the development of the cryptocurrency market

In the first part of the story, we showed that the collapse of the cryptocurrency market in 2018 and the beginning of its recovery in 2019 fit well with the general patterns of development of financial bubbles, and also repeat the dynamics of bitcoin in 2014-2016. But besides analogies with other bubbles, there are many other arguments in favor of global market growth, among which are the political and economic trends of recent years.

Mitigating the political climate around crypto assets

The whole of 2017 was a heated debate about the legal status of digital assets. One of the central events of the year was their April legalization in Japan. It was she, according to many, who spurred the sharp May growth of the crypto market (especially altcoins). But most other countries during this period took a more skeptical position.

The US leadership has repeatedly refused to register Bitcoin-ETF - exchange-traded investment funds, the price of shares of which would repeat the price of BTC. It extremely tightened the terms of the ICO procedure, and some countries - China, South Korea - completely banned it. Certain countries, such as Indonesia and El Salvador, have generally banned cryptocurrencies, including criminal liability.

A number of countries, including Russia, have taken an alarming and waiting position, regularly promising to introduce restrictions of varying degrees of rigidity, but not rushing to put this in the form of laws.

The turning point on the path to world-wide recognition of cryptocurrencies was the beginning of trading in bitcoin futures on the Chicago CME exchanges (the world's largest turnover exchange) and CBOE in December 2017. It was then that the American leadership openly recognized that cryptocurrencies now have to be reckoned with. With the beginning of these trades, powerful US financial circles became interested in the development of the cryptocurrency market, the opinion of which the political leadership cannot ignore.

The Chicago Mercantile Exchange (CME) is the world leader in trading volume

In 2018, the paradox became obvious: even if in the long term cryptocurrencies are dangerous for the modern political system (tied to central banks and currency control), the countries that will ban them first will suffer the most. And also those who simply overdo it with the escalation of negative moods. Those countries that decide to legalize will win. It is in them that the brain drain and capitals from more repressive or unpredictable countries will go. A typical example of this is the GRAM crypto project of the Russian businessman Pavel Durov, whose ICO in 2018 gained record amounts, but was conducted in the United States, and not in the legislatively uncertain Russian Federation.

The experience of countries legalizing cryptocurrencies has been successful both from a financial point of view and from the point of view of international prestige. They showed themselves open to progress and new freedoms. In addition to Japan, it is worth noting here Switzerland, which legalized cryptocurrencies back in 2016, but made itself especially vivid in 2018, when its banks began to introduce cryptocurrency services one after another. Among the innovative banks was even the Swiss “daughter” of the Russian Sberbank. The very phrase “Swiss bank” has become synonymous not only with high reliability, but also with innovation.

A landmark event in 2018 was the legalization of cryptocurrencies in Germany, the leading economy of the European Union. Very liberal measures regarding cryptocurrencies today also operate in the Czech Republic, Sweden, Canada, Denmark, Australia, Estonia, Norway, Finland and several other countries.

The Legalization Parade showed: repressive politicians should not count on a global ban on cryptocurrencies (which theoretically seemed possible in 2016-2017). Economically developed countries made the obvious choice: “if you can’t stop the process, head it.” Namely, in these countries the maximum capital is spinning, and it is precisely on their business activity that the market situation especially depends.

Explosive growth in cryptocurrency retail use

Despite the obvious popularization of cryptocurrencies, there is still a myth that they are a purely investment and speculative tool. Which, if somewhere, is used as a means of payment, it is only on the darknet, moreover, for illegal goods. But now this is not so. Back in 2013-2015, legal services accepting Bitcoin appeared, and in 2016-2018 their market underwent explosive growth.

In 2013, the pioneers of the cryptocurrency market of goods and services were, for example, Virgin Galactic, a space travel company, Victoria's Secret fashion lingerie retailer, and provider of online store programs Shopify. In 2014, the cryptocurrency was also mastered by the Overstock online store, the Expedia travel service, the online game operator Zynga, the Microsoft software monster and many others. Some of these companies have risen seriously on innovations: for example, Shopify and Overstock have since risen several times.

Today, hundreds of large companies and thousands of small ones accept cryptocurrencies, and the assortment of their products is approaching that in the traditional economy. The most popular cryptocurrency product categories with large well-known companies are tourism and airline tickets (Expedia), software and games (Microsoft, Shopify, Zynga, Steam), clothes and other consumer goods (Victoria's Secret, Overstock.com, Rakuten), as well as food products (Subway, KFC, Burger King - in Russia). Also available for cryptocurrency, for example, Playboy erotic products, premium accounts of the 4chan.org and reddit.com forums, Bloomberg.com business news, cars in the Czech Alza showroom and much more.

A number of well-known companies, although they prefer traditional payments, but allow crypto payments through intermediary services such as gyft.com (trading a Gyft card for BTC). For example, the Ebay online store, Wallmart supermarket chain, Starbucks restaurants, Uber taxi service, etc. The turnover of gyft.com is estimated at $ 25 million with only 38 employees.

Small young companies often use off-the-shelf multicurrency gateways such as coinpayments.net. It supports dozens of currencies, it hosts about 400 companies. In addition to the mainstream, there are many specialized products. For example, crypto-armory.com sells ammo, francvila.com sells Swiss watches, directvoltage.com sells 3D printers, electric motors, CNC machines, etc. Some new stores not only accept cryptocurrencies, but also intentionally refuse fiat. For example, crypto-armory.com, explaining its refusal to fiat, indicates both ideological and narrowly pragmatic reasons. According to the owners of the store, it is technically and legally easier to accept cryptocurrency payments.
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Ammo from the cryptocurrency store crypto-armory.com

An important trend of 2017-2018, in addition to the general growth of the commodity market, is the reorientation of stores to multicurrency payments. Previously, most of them accepted only BTC, but now a sign of good taste has also begun to accept LTC, ETH, XMR and at least a few other currencies.

So, while politicians were solving the “allow cannot be prohibited” task, a huge market for cryptocurrency goods spontaneously developed on the Internet. Some of its members have multi-billion capitalization. This market is very international. Most goods and services can be purchased even from Russia and other countries where cryptocurrency is illegal as an internal means of payment, but not prohibited as such. Today it’s hard to come up with a consumer product that cannot be bought for cryptocurrency.

The latest trend - support for cryptocurrencies with smartphones

The first smartphone with a cryptocurrency wallet was the HYPERLINK HTC Exodus 1 , released in the fall of 2018. Then came the HYPERLINK Finney crypto smartphone . And in March 2019, the smartphone from the largest South Korean company Samsung - Galaxy S10 unexpectedly took this baton. And although Samsung refrained from directly embedding the cryptocurrency wallet in the standard package, Samsung branded wallet can be installed from the Galaxy Store.

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Galaxy S10 - Samsung’s first smartphone with cryptocurrency support

There are a number of complaints against Samsung’s initiative for crypto enthusiasts, among them the lack of Bitcoin (BTC) support. At the moment, Samsung Blockchain Wallet only supports Ether (ETH) and currencies created on its basis and ERC-20 tokens:
Basic Attention Token (BAT), Chainlink (LINK), BinanceCoin (BNB), True USD (TUSD), USD Coin (USDC), Paxos Standard (PAX) and others.

However, from a political and PR point of view, the appearance of the Galaxy S10 is a big event.

Firstly, a smartphone can attract new people to the cryptocurrency market, who have more confidence in the famous brand than in traditional bulky cryptocurrency wallets. Now many people are only frightened of cryptocurrencies by technical difficulties, and smartphones have repeatedly proved their ability to promote to the masses what used to seem too complicated.

Secondly, this step by Samsung is a clear signal to both its own and other governments: big business is on the side of new technologies. South Korea has a reputation as a country not too friendly to cryptocurrencies, but it was its business giant that publicly showed a different attitude.

Third, Samsung’s initiative is likely to be taken over by other leading communications manufacturers. So, soon after the release of the Galaxy S10, there was news that the crypto wallet will soon be available in iOS Opera Touch, that is, cryptocurrencies can also be stored on Apple iPhone.

All this creates excellent prerequisites for both the global legalization of cryptocurrencies and the market growth due to an increase in the number of users.

Conclusion

So, despite the “roller coaster” of cryptocurrency rates, some fundamental processes in recent years have been developing steadily in the same direction: expanding the commodity market for cryptocurrencies, increasing the number of countries with a liberal attitude to cryptocurrencies, adopting cryptocurrencies as a strategic technology with ever-new industrial giants . The total number of citizens who have tried to work with cryptocurrencies is growing steadily, and new technological trends (in particular, crypto smartphones) can further accelerate this growth.

The only thing that can seriously destroy the cryptocurrency market is its global ban, but it seems unlikely. There are about 40 million Bitcoin wallets on Earth now. It is believed that on average their number doubles annually, which means that in 5 years it can reach a billion. And if now the global ban on cryptocurrencies is unrealistic due to their profitability for developed countries, then by that time the ban will be impossible almost physically.

In the first part of the story, we presented arguments why investors should not be afraid of the 2017-2018 bubble: according to the results, it showed not so much the riskiness of crypto investments, but their long-term prospects. Today we talked about political and economic events that took place simultaneously “behind the scenes”, and in which there were no “falls” - only progressive development towards the construction of the cryptoeconomics. And in the next, third, part, we will try to talk in detail about the specific financial reasons for the collapse and recovery of the market in 2018-2019.

Trident analytics department, Victor Argonov, Ph.D.
Source: trident-germes.ru/istoriya-razvitiya-kriptovaljuty