Why cryptocurrency will fail?
Cryptocurrency is a utopian dream. Since its inception about a decade ago, cryptocurrency has had its fair share of ups and downs. Does the high volatility lead to a mind-twister as to why cryptocurrency will fail?
Well, many factors control the success or failure of a cryptocurrency. The query can be divided into two perspectives, whether this failure will impact the entire crypto ecosystem or relates to only a single cryptocurrency.
Consequently, cryptocurrency can fail, whether as a whole or as a single unit. It can occur in the short term and in the long time.
In this guide, we will explain the significant causes of the failure of cryptocurrency. In contrast, it will establish what leads a cryptocurrency to succeed. So let’s get started.
Possible cryptocurrency failure causes
With fiat money going digital, the cryptocurrency future looks dim. Hence, a cryptocurrency needs to come up with added features to survive in the long term. Otherwise, it is bound to doom.
Although, many experts tip cryptocurrency to replace fiat money in the future. Only time will tell, as of now, let’s see possible hindrances for cryptocurrency.
- Market saturation
Over saturation is one of the most prominent factors causing failure. Since the cryptocurrency market has no regulating authority, it is flooded with new coins daily.
Though the crypto market is relatively young, it is already overrun with many developers. Many similar options have forced the need to reach where standing out from the competition has become challenging.
Such conditions lead to the failure of even promising projects. Although the crypt market is not slowing down, many coins get lost in a rush if we observe closely.
The only way forward is to have a centralized monitoring system. The duty of this controlling hub will be to allow only those unique projects that can attract new investment.
Otherwise, the market will eventually slow down, with investors confused with many options. Creating healthy competition with over-saturating the market can help cryptocurrencies to stay relevant.
- Volatility
The cryptocurrency market has crashed multiple times. The speculators keep investors guessing where it is heading. It becomes hard to get new investments in such an unstable environment.
The price of the token fluctuates multiple times in a day. Like any other economic market, the value of cryptocurrency depends on demand and supply.
The problem lies with the demand. One week, a hot-selling project surfaces, and its value skyrockets. But the next, when the hype settles down, the interest fades, and so does the demand. Such a downfall causes a knock-on effect.
Therefore, the high volatility nature of the cryptocurrency ecosystem causes many projects to fail. Thus, becoming one of the answers to why cryptocurrency will fail.
- Lack of real value
Currencies store value. They always have gold backing or government promises to pay the bearer. On the other hand, cryptocurrency does not offer this luxurious confidence.
Governments have means to protect the value of fiat money. Such tactics provide formidable powers, which eventually give confidence to investors.
Similarly, stocks offer value by creating profits through market trading activity. Furthermore, commodities have real value as the masses purchase them.
In contrast to all of the above, a cryptocurrency’s only value is the price any other person is willing to pay for your cryptocurrency. In that sense, it is nothing more than a piece of artwork.
Hence, the cryptocurrency’s lacking storing value is one of the causes of its failure.
- Level of competition
The Fiat money market is centuries old, with nations supporting them. Cryptocurrencies are competing for national currencies. Replacing them is not an easy task.
We cannot imagine the Central Bank of China, the US, or the EU shutting down their fiat money reserves and opting for a crypto coin. Such a move will cause catastrophic results and collapse entire financial systems.
Many countries have already banned cryptocurrencies, including China. Hence, cryptocurrencies have massive competition from worldwide fiat currencies.
So, to avoid failure, cryptocurrencies need to get governments’ confidence. It will help them compete against such a highly organized competitor.
- Lack of Application
For a competitive edge, cryptocurrencies must offer additional utility and storage value. Such an application is not easy to embed.
However, many new cryptocurrencies fail to offer diversified utility options. The lack of application causes them to drain out of the market.
Since utility helps cryptos gain value, a lack of utility is why cryptocurrency will fail.
- Decentralization
Decentralization is bad a factor for cryptocurrency. A lack of central control leads to a lack of trust.
It becomes a significant factor for cryptocurrency to fade out. Since the power is distributed among many hands, any single party can disrupt services.
Frequently Asked Questions
What is the biggest problem with crypto?
The biggest problem with crypto includes volatility and susceptibility to hacking and theft. In addition, many other factors revolve around cryptocurrency.
What is the future of cryptocurrency?
As per analysts, cryptocurrency will rise to triple in size by 2030. Which means it will have an estimated value of $ 5 billion.
Why cryptocurrency will fail?
The main factors for cryptocurrency failure include market saturation, lack of utility, high competition, and volatility.
Why is cryptocurrency falling?
High global inflation and subsequent hawkish actions are causing cryptocurrency to nose-dive in value. However, recently these have started to gain weight.
Will cryptocurrencies vanish from the market?
It is unlikely that cryptocurrency will fade into extinction. Since crypto coins offer value to investors and attract new investments each day, we can safely say they will not vanish.
Conclusion
Cryptocurrency may or may not hold the future. But high volatility leads to bothering the mind by asking a valid question as to why cryptocurrency will fail? We have covered all the significant factors which may lead to cryptocurrency failure. Some of these are important and must be taken care of in the crypto ecosystem.
However, since their inception, crypto coins have offered utility to their users. Thus, it can survive in the short term. I hope we can satisfy the question of why cryptocurrency will fail. Leave your suggestions in the Comments box, and keep visiting this page for more crypto-related topics. Adios!