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October 16 2022
18:49 pm
reading
2 minutes
Abu Dhabi: «The Gulf»
The cryptocurrency scene has been quiet during the summer season, but the broad turmoil in cryptocurrencies has boosted the maturity and healthy performance of this market. Factors such as tight energy supplies and regulatory developments contribute to fears about future decentralization, while individual traders have only followed these developments from a distance. For their part, institutions are still playing an active role in this regard, making it clear that the cryptocurrency world is not just an arena for blockchain enthusiasts for digital transactions and speculative traders.
Anders Nesten, Senior Quantitative Analyst at Saxo Bank, said: “The decline in bitcoin prices in 2022 is forcing miners to move to countries with low energy prices or suspend their operations entirely. The levels of security and decentralization of the network will decline as the number of miners decreases; However, we do not see the increase in the level of centralization as a major risk over the next few years.”
He added, “Huge government institutions are increasingly concerned about the high computing burden of the Proof of Work (PoW) protocol to validate transactions that Bitcoin uses. We expect cryptocurrencies to face a great deal of risks in the event that government institutions tend to regulate dealing with them because of their large energy consumption. This may limit the number of use cases for cryptocurrencies, which negatively affects the levels of demand for crypto technologies. The number of miners will likely decrease, when the costs of mining bitcoin become more than their selling value.”
And he added, “It appears that speculative traders have completely disappeared from the cryptocurrency scene in 2022. Non-fungible tokens are trading at an all-time low.
Institutional interest in cryptocurrencies seems to be the only bright side of the turmoil in the markets, especially since it has not diminished as was the case for individual cryptocurrency traders. Over the past few months, we have seen many major institutions go to invest in the cryptocurrency market or expand their services, within the digital asset category, despite the significant decline in the cryptocurrency market.”
“The cracks are already starting to appear,” he said. Despite the decline in the number of developers in the cryptocurrency world over the past three months, the huge amounts of capital investment that went into this sector during 2021 and the beginning of 2022 can help institutions working in this field continue for some time.”
He concluded, “We see applicability as the most prominent driver of cryptocurrencies in the next stage, with the possibility of moving from investments in random crypto tokens and non-fungible tokens towards crypto technologies with specific uses. Sony is looking to create media enhanced with non-fungible tokens to give artists the ability to strike faster and more equitable agreements, while GameStop advances digital ownership in games, building on the technology of non-fungible tokens.”
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