Last year the price of Bitcoin reached $17000, but after that, these currencies plunged. The experts are speculating that the absence of any central authority to regulate these currencies may drag investors into trouble and can lead to another financial crisis.
Cryptocurrencies are facing numerous problems and winning over them let us discuss them:
- In spite of the commendable performance of blockchain in providing quicker transaction, numerous problems may arise sooner or later if the network is not regularised. However it is praiseworthy that these currencies have still risen to its peak in spite of not having any regulatory authority to regularise them but still, chances are there that many potential risks may arise any time.
- To act as a mainstream currency Cryptocurrencies has to fulfill certain requirements. It should behave in the same manner as the tradition currency does, for example, one should be able to use it to buy and sell things. One of the gifted factors of cryptocurrency is its ability of peer to peer transaction across many industries. The traditional currencies have stored values in it, while the market of these currencies is volatile. According to a report, Bitcoin is considered six times more volatile than gold. It should represent a cost of any item, in other words, it should represent the value of a thing unfortunately due to the volatility of the market only a few merchants are ready to accept it.
But the most interesting fact is that it does not need to be promoted to the standard of money to trigger the financial crisis. If they are simply traded as financial securities or commodities it has the capability to trigger the financial crisis the same way that had happened in 2008.
The Cryptocurrencies operate as financial securities, mainly by the start-ups to fund their business. Especially by those who found it very difficult to raise funds by the traditional system may be because of the regulatory matters which they could not fulfill. However, this is an easier, cheaper and quicker process of raising the fund needed to start a business.
The business started though ICO (initial coin offering) faces fewer regulations than IPOs (initial public offering) such start-ups only issues a white paper outlining their business objectives and the initial cost required to start the business. As the business was started using blockchain technology the identity of the owner remains hidden in the blocks and tokens and this may a potential cause of threat to the subscriber. Click find out more for more information