Growth factors: What will set up the third wave of cryptocurrency optimism?

    30 Dec 2021

    The second wave of worldwide interest in cryptocurrencies seems to be nearing its end. If the first one arose in 2017, the second began in 2020, during a global pandemic. What could “drive” the third wave, and when should we expect it?

    You may not remember the crypto boom of 2017 yourself, but that’s when most of today’s cryptocurrency market players entered the industry. The year marked a historic shift for cryptocurrencies in particular and all blockchain-based solutions in general – they were no longer a “toy for computer geeks”, having gained the attention of a wide range of people.

    Naturally, it came at a cost: overheated market, unwanted hype, fraud, and heightened expectations leading to massive losses. Still, the change was fundamentally important, as the new technology showed that it was too good to remain in the shadows for much longer. And even though back in 2017, there really were no obvious prerequisites for a crypto boom, it was akin to a greet sprout breaking through the pavement. The innovativeness and public utility of cryptocurrencies were so prominent that they just couldn’t stay out of sight of the public.

    2020, on the other hand, had the perfect conditions for the second crypto boom. First, hundreds of millions of office workers, schoolchildren, and students have transitioned from offices and classrooms to their apartments. There, they quickly discovered that being by themselves, they didn’t have to pretend to be busy all the time, instead finding time for various new activities.

    People got into computer games, online shopping; some started trading shares as a form of gambling (2020 was a big year for Robinhood and Revolut fintechs), others – opened for themselves the world of the blockchain, cryptocurrency, and DeFi.

    Secondly, almost all world countries, trying to prevent the economic crisis, began to pour huge funds into the economy – literal trillions of dollars in the case of the United States. And no matter how democratically they were distributed, the bulk of this money still ended up in the pockets of white-collar workers, bored at home in front of their computers. (That’s just how ​​our world works.)

    The circumstances aligned: free money, free people with higher education, a newfound gambling streak, and discontent with the existing financial system. As a result, crypto “exploded” again and on a much larger scale than in 2017.

    We are still experiencing this latest wave. Not that long ago, the US House of Representatives approved the next stage of the $ 2 trillion Biden plan. More than $ 1.64 trillion for ten years is supposed to get invested in the economy to combat global warming and social inequality.

    The House voted for the “Build Back Better” bill, which includes:

    • emission fines;

    • incentives for electric car purchase;

    • expands the child tax breaks;

    • removes the threat of deportation for millions of migrants living in the country.

    To increase budget revenues, the bill introduces a 15% minimum corporate tax and an additional 5% income tax on the individuals earning over $ 10 million a year, which goes up to 8% if the income exceeds $ 25 million.

    This means another massive infusion in the economy. And regardless of all the talk of “green energy” and social equality significant part of the money will still inevitably flow to the cryptocurrency market.

    Of course, President Joe Biden already signed the Infrastructure Investment and Jobs Act, which doesn’t take into account the interests of the crypto sector. Moreover, the new law can seriously worsen the conditions for the cryptocurrency business. But this is a topic for a separate article. In the meantime, we simply note that there are prerequisites for the next replenishment of the cryptocurrency industry with fiat money.

    However, it is not going to last. The American authorities have already indicated that in 2022 they won’t print money at the same rate; on the contrary, they will begin to take it out of the economy. Other countries are following suit and moving away from the fiscal economic stimuli. This means that the extensive growth of the crypto industry will have to give way to intensive growth.

    What could stimulate the third wave of interest in cryptocurrencies? In my opinion, it is people’s struggle against the state apparatus. It may sound pretentious, but this is why Bitcoin was created in the first place. And now those in power are recklessly laying the foundation for the resistance themselves.

    I have already mentioned before that powerful states prefer to convey new trends in their policies through retired officials. So the other day, former Secretary of State and former US presidential candidate from the Democratic Party, Hillary Clinton, announced at the Bloomberg New Economy forum that cryptocurrencies pose a threat to the US dollar. According to Clinton, digital assets can destabilize global currency markets and states. “It looks very interesting and somewhat exotic … but has the potential for undermining currencies, for undermining the role of the dollar as the reserve currency, for destabilizing nations”, – was the quote from the ex-secretary.

    So there’s no smooth sailing ahead for the crypto industry. At least not in our lifetimes.

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