Cryptocurrency: Challenges, Solutions, and Facts to Start Investing in 2022

Anusree Bhattacharya | January 11, 2022 | 108 views

Cryptocurrency_Challenges

Crypto will promote a significant change in the financial services ecosystem.”

Roberta Antunes, Chief of Growth at Hashdex.

Roberta Antunes, Chief of Growth at Hashde shared this thought on cryptocurrency in an interview with Media 7.  Through her thoughts, you can guess how cryptocurrency will gain momentum in the future.

With significant announcements in the cryptocurrency market, 2021 was the “year of cryptocurrency.” From the emergence of new digital coins over the notion of “currency,” 2021 will be recalled for crypto even more worldwide. As the world has stepped into the digital landscape, businesses have been exposed to adopting the digital network for currency instead of cash.

The optimistic buzz around investing in cryptocurrency worldwide has encouraged investors and entrepreneurs. They intend to transform the global financial system in 2022, especially after the treacherous COVID-19 pandemic. The rise of cryptocurrency investors globally affirms that it has emerged as one of the most prevalent investment modes. The emergence is against traditional assets such as real estate, stocks, and gold.

But, do you know how investing in cryptocurrency has gained such a populace? What financial firms or finance leaders have faced during the crisis that surfaced in 2020? It’s time to read about those extreme investing challenges in cryptocurrency.

Significant Cryptocurrency Challenges & How to Overcome?

Even though the extent of the adoption of cryptocurrency is a bit challenging to measure, several studies suggest that emerging financial markets and developing economies may lead the way ahead.

Most notably, several financial firms and businesses in developing regions increased their trading volumes in crypto in 2021. But, looking ahead to its rapid adoption, crypto exchanges can pose significant challenges. One of the challenges is that even residents start using crypto assets instead of local currency.

Another challenge is that it can reduce the ability of central banks to implement monetary policy effectively. There could be a lot of financial stability risks. For example, funding risks might arise if there are currency mismatches. Also, consumer protection could face risks if they deal with crypto.

Threats to fiscal policy could intensify if cryptocurrency gains traction, enabling tax evasion. The increased demand for crypto could also hinder capital flows. As a result, it could affect the foreign exchange market.

For all challenges, there are solutions. Similarly, cryptocurrency challenges can also be solved with eminent solutions. Some of them are discussed, which will aid you in investing in cryptocurrency further.

As a first step, financial firms need monitoring abilities. The abilities are towards rapid developments occurring in the cryptocurrency network. To this end, tackling data gaps is a must. The policymakers of cryptocurrency should enhance cross-border coordination. The cross-border coordination will help to minimize the risks of data theft. And ensure effective supervision and implementation at the same time.

Firms should also focus on the implementation of existing global standards for cryptocurrency exchanges. Standards focused on cryptocurrency are currently limited to risks such as money laundering, bank exposures, and similar ones. However, additional international standards in areas such as security regulation, payments, and more should also be applicable.

As the role of technology grows, regulations should be equivalent to the risks and the economic functions cryptocurrencies serve. For instance, rules should be associated with firms that provide similar products, such as bank deposits or money market funds.

In some emerging markets and developing economies, crypto risks can be driven by the fragile credibility of the central bank, inefficiencies in payment methods, vulnerable banking systems, and restricted financial services. So, in this case, financial authorities need to focus on strengthening macroeconomic policies. They should consider the benefits of issuing digital currencies and improving payment systems. Digital currencies may help reduce crypto-threats with the help of better payment technologies.

Globally, financial policymakers should also focus on making cross-border payments faster, transparent, flexible, and cheaper through the G20 Cross Border Payments Roadmap.

The time has come to take decisive action. Firms should be well-coordinated globally to allow the benefits of cryptocurrency to flow. But, at the same time, it should also address the exposures.

Let’s focus on the facts about the rising importance of cryptocurrencies in 2022. Also, these facts will encourage you to practice digital payments over conventional ones. So, let's dig into it straight away.

Fact #1: More than 73,000 Cryptocurrencies Are Available Today

Since November 2021, more than seventy-three thousand cryptocurrencies have been available. The reason is that it's relatively easy to create a coin and put it first on the market. The most interesting thing is that the top twenty coins have acquired 86% of the cryptocurrency market.

Fact #2: Buy and Sell Bitcoin at Bitcoin ATMs

Have you heard about the bitcoin ATM? A bitcoin ATM accepts cash entry. It converts cash into Bitcoin and other cryptocurrencies exchanges for digital payment. Several Bitcoin ATMs also enable you to sell bitcoin, which can be withdrawn in the form of cash.

One of the most fascinating facts about cryptocurrency is that over 5,000 Bitcoin ATMs are spread worldwide. One of the highest numbers of ATMs in the world is in America alone.

Fact #3: Cryptocurrency Value Is Tremendously Turbulent

Like stocks and the stock market, several external factors directly impact the value of cryptocurrency. Even cryptocurrency trading platforms are directly affected by the turbulence. The reality is that cryptocurrency valuations can lose up to 30%-50% overnight.

Values can either swim or sink. Therefore, you need to have a smart sense of trading. Whenever you deal in cryptocurrencies, make sure you do it with proper research (when the value is in your favor).

Fact #4:  Pay Taxes over Cryptocurrency Gains

If you’re investing in cryptocurrency and gain, you’ll have to pay taxes. Despite the number of coins you have gained or managed to earn, you might have to pay national taxes. And the tax amount might be based on long-term or short-term investment gains.

Fact #5: You Can Trade All Day, Every Day

You can trade on a cryptocurrency trading platform all day and every day. That means the platform and exchanges are open 24*7. Weekends or holidays do not exist in the crypto calendar, unlike in the stock and bond markets, which remain closed on holidays and weekends. 

Some financial regulators will be subjected to a batch of new regulations and enforcement actions. This will eventually drive the cryptocurrency platform further into the mainstream.

Patrick Haggerty, director at Klaros Group, a financial services advisory and investment firm


Fact #6: Cryptocurrency Is Boon for Ecommerce

Now, this is an incredible fact for eCommerce business owners. Cryptocurrency could aid eCommerce businesses to reach diverse clients and customers by providing digital currencies as a payment option. As most eCommerce businesses operate digitally and have moved to digital exchange platforms, cryptocurrency would boost the business more. The best thing about cryptocurrency is that there isn’t a need for any medium or any third party in transactions. So, eCommerce businesses can enjoy the new tide of transactions.

Fact #7: No Foreign Borders Required in Exchange of Coins

So, if your business deals with cryptocurrency, then it needs no foreign exchange process. There are no borders for cryptocurrency exchanges. Because the digital economy doesn’t work with a centralized economy.

As major organizations such as PayPal, Visa, and MasterCard begin accepting cryptocurrency asset payments in 2021, the trend appears to stay even in 2022.


What Lies Ahead for Crypto in 2022 and Beyond?

Here’s what Roberta Antunes, Chief of Growth at Hashdex, says further,

Crypto is a way to incentivize decentralized contributions and allow people to work for the causes they believe in.

As another year turns into 2022, it looks promising for the cryptocurrency market. Market analysts from global market insights predict that it has the capacity to hit US $100,000 by 2023. However, it will rise even further and may reach its mark by the first quarter of 2022.

The prediction is based on how trading companies have started applying for cryptocurrency licenses. The companies are building digital platforms rapidly. It's all because, now, financial cryptocurrency products have become significant and, thus, can’t be ignored.

Frequently Asked Questions


Why is cryptocurrency becoming popular?

The interesting aspect of cryptocurrency making it popular is that it's the most secure medium of exchange. Transactions are public, impregnable, protected, and remain under the control of users.

Is it possible that cryptocurrencies will fail?

According to CoinMarketCap, there are now more than eleven thousand cryptocurrencies since the pandemic hit. There were even more than 6000 crypto transactions in the year of the pandemic. So, you can presume that this digital currency is still functioning.

What is the future of cryptocurrency?

Cryptocurrency has a potential future even after prices fluctuate. While the world gears up to become entirely digital, cryptocurrency will lead to digitalized payments. Also, it will be an effective means of payment.

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