06 January 2022 • 9 min read
If recent headlines are any indication, then the future of cryptocurrency is a very promising one.
Elon Musk, founder of SpaceX, recently announced that his company Tesla invested $1.5 billion in bitcoin and plans to start accepting the currency as payment.
Users of Apple Pay, Google Pay and Samsung Pay can now make transactions with cryptocurrency using BitPay.
Mastercard has indicated that it will begin supporting select cryptocurrencies on its payment network, while PayPal already allows its users to buy, sell and hold cryptocurrency.
Social media giant Facebook continues to work on its blockchain-based payment system and cryptocurrency known as “Diem” (it was previously called “Libra”).
The oldest bank in the United States, Bank of New York Mellon, announced recently that it will begin financing bitcoin and other digital currencies.
One of the oldest insurance companies in the US, Massachusetts Mutual Life Insurance, bought $100 million into bitcoin in December 2020.
Germany’s biggest bank, Deutsche Bank, has already created a Deutsche Bank Digital Asset Custody prototype, “a fully integrated custody platform for institutional clients and their digital assets, providing seamless connectivity to the broader cryptocurrency ecosystem.”
In a word: demand. In the absence of demand, cryptocurrencies, or any other asset class, would have little actual value.
But that doesn’t explain what is driving demand. How has the growing popularity of crypto translated into actual success and what are the implications for the future of cryptocurrency? After all, just because something is popular doesn’t mean that it’s financially profitable or successful. When Uber, for example, went public in 2009, it was valued at $8.1 billion and had 91 million users, but admitted that it might never turn a profit. Popularity without profitability is not exactly a success story.
However, cryptocurrencies are different. Early crypto enthusiasts were drawn to these digital currencies and the blockchain tech behind them for a variety of reasons, including independence from the international banking system, greater anonymity and increased profitability. From borderless payments and decentralized finance (“DeFi”) to machine-to-machine transactions, cryptocurrencies have truly become a global phenomenon, which is why so much ink has been spilled by writers and bloggers about the cryptocurrency revolution. And with mainstream traders and institutions increasingly eyeing digital assets, there can be little doubt that cryptocurrencies have proven themselves to be both popular and successful. Below we take a look at some of the reasons why.
Decentralization, ease of use and lower costs
Having celebrated twelve years of existence recently, bitcoin has demonstrated its staying power. The first offering of bitcoin in 2009 also happened to follow on the heels of the 2007 –2008 global financial crisis in which years of financial deregulation permitted banks and other investment institutions to speculate on derivatives backed by mortgages of questionable value. When the bubble finally burst, financial institutions were left with trillions of dollars of near-worthless investments in subprime mortgages, with scores of people losing their jobs, savings or homes (and in some cases all three). The financial system had failed.
Independent of centralized banking, and therefore neither subject to their regulations nor the problems ensuing from deregulation, cryptocurrencies offered an attractive alternative to the shortcomings of the existing financial system. Enabled by blockchain technology, a public ledger of past valid transactions, cryptocurrency such as bitcoin could be traded safely and securely, often without the burden of expensive transaction fees. In addition, rather than any one nation, government or monetary system controlling the proverbial purse strings, decentralization meant that cryptocurrencies were self-regulated and self-governed, allowing for novel ways of carrying out transactions efficiently and with high levels of transparency and accountability.
Fintech, disruptive technology and digital assets
It might seem like a self-evident point, but it’s one worth mentioning. Digital platforms have had a transformative impact on human relationships—among customers, workers, employers and traders. The cryptocurrency revolution about which many people speak would be simply impossible without the digital revolution of the past few decades.
By combining finance and technology, the world of fintech has had a disruptive impact, shaking up the old way of doing things by injecting it with cutting-edge technology. Cryptocurrencies themselves are digital assets, or a digital record or representation of value stored and tracked in a public ledger called a blockchain. And the advantages of blockchain are numerous: dependability and trustworthiness, increased speed, reduced costs and reduced paperwork through tokenization, among other things.
One striking knock-on effect has been the rise of fintech startups focusing on different aspects of the cryptocurrency ecosystem, from wallets for storing digital assets along with exchanges for swapping and trading them to companies such as Trality that offer traders opportunities to create their own crypto trading bots. As the ecosystem expands, so too does the popularity of cryptocurrencies. Crucially, popularity has even translated into profitability.
In the next section, we’ll consider some of the challenges that cryptocurrencies face as they continue their ascendancy.
As we gaze into our crypto ball, let’s see what the future of cryptocurrency has in store for traders. With many experts estimating that the 2020 COVID-19 pandemic has hastened the decline of cash by almost five years, few are asking whether digital currencies will actually succeed (they have already). Instead, it’s a matter of when they’ll go mainstream. Nevertheless, there are some challenges ahead.
A significant generational divide exists when it comes to adoption rates of cryptocurrencies. Older generations are typically more sceptical of crypto’s long-term viability, expressing fears about volatile financial bubbles as well as uncertainty over how cryptocurrencies actually work.
Conversely, recent research by Deutsche Bank concluded the following: “More than a third of millennials believe that cryptocurrencies will soon replace cash and credit/debit cards. Our exclusive survey of over 3,700 people in the United States, United Kingdom, Germany, France, Italy and Spain found that they envision a purely digital currency.”
Crypto can be temperamental. Among asset classes, bitcoin is particularly volatile. Between January 2018–June 2019, the price of bitcoin fluctuated an average of 2.67% each day. During that period, traders could take advantage of daily price upswings as high as 16% and downswings of more than 18%. Compared to gold and fiat currencies, this volatility was more than six times higher. When it was introduced in 2009, bitcoin had zero value. A little over twelve years later, the price of bitcoin broke $50,000, marking a year-to-date increase of 74%. Consequently, many now talk about bitcoin as a hedge against inflation and uncertainty related to the purchasing power of the U.S. dollar. Whether this volatility can be tamed remains an open question.
As Dirk G. Baur and Thomas Dimpfl argue in their article “The volatility of Bitcoin and its role as a medium of exchange and a store of value,” the regulation of cryptocurrencies varies from country to country. In some countries such as Bolivia, Morocco and Nepal, bitcoin is banned, while elsewhere there are no limits on its use (e.g. EU, USA). In Bahrain and Qatar, citizens can use bitcoin internationally but not domestically. There are also tax implications to consider, too (e.g. bitcoin transactions are exempt from VAT, but any gains are subject to tax).
In October 2013, the world’s first bitcoin ATM was installed in Vancouver, Canada. A mere two months later, Europe received its first bitcoin ATM in Bratislava. More recently, the owner of two NYC bars is looking to carry out the first cryptocurrency-only restaurant sale in the United States. A Switzerland-based consulting firm connects buyers and sellers interested in purchasing residential real estate with bitcoin.
The list of things that can be bought and sold with cryptocurrency seems endless: basketball tickets, fast food, luxury watches, mattresses, beer, coffee, taxis, airline tickets and, yes, even a Tesla. Are we witnessing the demise of fiat money? Is cash still king?
It all depends on whom you ask. One piece of news in particular caught our eye. In their “Imagine 2030” report, Deutsche Bank identifies cryptocurrencies as additions rather than substitutions to the global inventory of money, but feels that this could change by the end of the decade. As Marion Laboure describes in her contribution “Cryptocurrencies: the 21st century cash,” “nearly two thirds of consumers prefer dematerialised to cash payments and a third are concerned by anonymity. These are the two things that cryptocurrencies do best.” According to Laboure, if cryptocurrencies can overcome three main hurdles in the future (which we’ll explore in the next section), then the future of cash is at risk: “As we look to the decade ahead, it would not be surprising if a new and mainstream cryptocurrency were to unexpectedly emerge.”
Elsewhere, a January 2021 report on the future of cryptocurrencies by EU Startups foresees the following:
Looking at the different sectors, in the future, trading and e-commerce and retail segments are expected to hold a major market share when it comes to cryptocurrencies. The penetration of digital currencies in digital payments is expected to affect the cross-border transfers, and digital currencies have the potential to become the main vehicle for e-payment if not the only one. This will make digital payment services – powered by blockchain technology – the next great upheaval in global e-commerce growth. Financial institutions are also directed to blockchain technologies, which is expected to drive the market in upcoming years. The financial ecosystem will likely undergo massive disruption.
Our take? There’s been a lot of noise for years about the future of cryptocurrency and whether or not crypto will replace fiat money, with many compelling arguments on both sides of the bitcoin (see what we did there?). While it’s impossible to predict anything with certainty, few will deny that cryptocurrency has been going from strength to strength as it moves closer and closer to mainstream accessibility and acceptability.
Given their growing scalability, increasing profitability and attractiveness to traders both big and small, cryptocurrencies are here to stay. At this point, it’s less of a question of whether you should start trading them, and more a matter of why you haven’t done so already.
As traders, we adopt, but must also adapt, which means embracing new types of digital assets as well as cutting-edge digital tools to maximize our strategic goals. To trade profitably, you need all the help you can get, and one important and underappreciated technology that should be in every trader’s toolkit is automated trading powered by cryptocurrency trading bots. Some of the advantages of using crypto trading bots to automate trading include:
emotionless trading without errors
higher trading speeds
backtesting and paper trading
consistent trading discipline.
Think of crypto trading bots as the Usain Bolt of crypto trading—unmatchable speed, reliability and efficiency. Since they can communicate directly with crypto exchanges and place orders automatically based on parameters that you define and control, crypto trading bots are lightning quick. They also run like clockwork, ensuring consistent trading discipline and optimizing long-term performance, which translates into emotionless trading and fewer errors. By running multiple trading bots, you can even diversify your portfolio, reducing your exposure and risk as a result. But before you enter the race, you’ll need a few warm-up sprints, which is where backtesting and paper trading come into play.
At Trality, we provide you with the state-of-the-art tools you need to succeed, from bot creation and backtesting to trade execution. Backtesting is at the heart of every bot creation iteration. That’s why we made it as fast as possible and provide debugging features that you won’t find anywhere else.
Algorithmic trading is something of an open secret. While institutional traders on Wall Street have been using algorithmic trading for decades, private traders have been slow to adopt this groundbreaking technology due to its perceived costs and complexity. Just like cryptocurrency, though, crypto trading bots can level the playing field, giving you a leg up across crypto markets.
Automation is the future, and this includes private investments through the use of algorithmic trading bots. But automated trading doesn’t mean that you’ll strike it rich automatically, which is why you need to be on your guard against solutions that try to hook their users in through flashy marketing promises, all while offering generic black box signals.
How is Trality different?
Trality is a platform for anybody who wants to create highly-intricate, super creative algorithms within an educational, community-driven infrastructure that promotes learning and development as a trader.
For those who don't know how to code advanced trading algorithms, we’ve developed our Trality Rule Builder.
Its graphical user interface lets you build your trading bot’s logic by simply dragging and dropping indicators and strategies. And rest assured: your funds’ safety lie at the heart of our business and we will do everything to safeguard them.
In fact, in our comprehensive article “Crypto Trading Bots: The Ultimate Beginner’s Guide,” we first cover the basics (e.g. what they are, how they work, and the benefits of algorithmic trading) and then offer a step-by-step guide to creating your own bot with Trality, from registration and our straightforward pricing categories to and creating, backtesting and deploying your bot.
Trality Rule Builder Walkthrough
Python coders can take advantage of our Trality Code Editor—the most advanced of its kind. The Python Code Editor is a state-of-the-art tool that allows developers to make use of their coding knowledge to create intricate and advanced strategies securely and fast. The Editor itself comes with a debugger and a range of libraries which includes Pandas, NumPy, Tulip and more. This tool is all about flexibility and we also recently updated the trading engine with a list of powerful features.
Trality Code Editor Walkthrough