Cryptocurrency: lives or dies? Part 2. Political and economic trends

Part 2. Political and economic trends in favor of the development of the cryptographic market

In the first part of the story, we showed that the collapse of the cryptocurrency market in 2018 and the beginning of its recovery in 2019 fit well into the general patterns of development of financial bubbles, and also quite well repeat the dynamics of Bitcoin in 2014-2016. But besides analogies with other bubbles, there are quite a few other arguments in favor of global market growth, including political and economic trends in recent years.

Mitigation of the political climate around cryptoactives

The whole 2017 passed in a heated debate regarding the legal status of digital assets. One of the central events of the year was their April legalization in Japan. It was she who, in the opinion of many, spurred a sharp May growth in the cryptographic market (especially altcoins). But most other countries were more skeptical during this period.
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The US leadership has repeatedly refused to register Bitcoin-ETF - exchange-traded investment funds, the price of the shares of which would repeat the price of BTC. It extremely tightened the conditions of the ICO procedure, and some countries - China, South Korea - banned it altogether. Some countries, such as Indonesia and El Salvador, have banned cryptocurrencies altogether, even criminal liability.

A number of countries, including Russia, have taken an anxious and expectant position, regularly promising to introduce restrictions of varying degrees of rigidity, but not hurrying to put it in the form of laws.

The turning point on cryptocurrency became the beginning of trading in bitcoin futures on the Chicago stock exchanges CME (the largest stock exchange in the world) and the CBOE in December 2017. It was then that the US government openly admitted that they now have to reckon with cryptocurrencies. With the start of these tenders, powerful US financial circles became interested in the development of the crypto market, whose opinion cannot be ignored by the political leadership.

Chicago Mercantile Exchange (CME) - the world leader in trading volume

In 2018, the paradox became obvious: even if in the long run cryptocurrencies are dangerous for the modern political system (tied to central banks and exchange controls), the countries that will ban them first will suffer the most. As well as those who simply overdone with the injection of negative moods. Those countries that decide on legalization will win. It is in them that the “drain” of brains and capital from more repressive or unpredictable countries will go. A typical example of this is the GRAM crypto project by Russian businessman Pavel Durov, whose ICO in 2018 collected record amounts, but was held in the United States, and not in the legally undefined Russia.

The experience of countries that legalized cryptocurrency has been successful both from a financial point of view and from the point of view of international prestige. They showed themselves open to progress and new freedoms. In addition to Japan, it is worth noting here Switzerland, which legalized cryptocurrencies in 2016, but especially clearly declared itself in 2018, when its banks began to introduce cryptocurrency services one by one. Among the innovative banks was even the Swiss “daughter” of the Russian Sberbank. The very phrase “Swiss Bank” has become synonymous with not only high reliability, but also innovation.

A landmark event in 2018 was the legalization of cryptocurrency in Germany - the leading economy of the European Union. Very liberal measures on cryptocurrency today also operate in the Czech Republic, Sweden, Canada, Denmark, Australia, Estonia, Norway, Finland and several other countries.

The “Legalization Parade” showed: repressive-minded politicians should not count on a global ban on cryptocurrencies (which theoretically seemed possible in 2016-2017). Economically developed countries have made an obvious choice: “if you can’t stop the process, lead it”. Namely, in these countries the maximum capital is spinning, and the market situation especially depends on their business activity.

The explosive growth of cryptocurrency retail use

Despite the obvious popularization of cryptocurrency, there is still a myth that they are a purely investment and speculative tool. Which, if somewhere, is used as a means of payment, it is only in the darknet, and for illegal goods. But now it is not. Back in 2013-2015, legal services accepting Bitcoin appeared, and in 2016-2018 their market underwent explosive growth.

The pioneers of the cryptocurrency market for goods and services in 2013 were, for example, the space tourism company Virgin Galactic, the designer of fashionable underwear Victoria's Secret, a supplier of programs for online stores Shopify. In 2014, the Overstock online store, Expedia travel service, Zynga online gaming operator, Microsoft software monster and many others also mastered cryptocurrency. Some of these companies have risen seriously on innovations: for example, the shares of Shopify and Overstock have since risen in price several times.

To date, hundreds of large companies and thousands of small companies accept cryptocurrency, and their range of goods is close to that in the traditional economy. The most popular categories of goods for cryptocurrency with major well-known companies are tourism and air tickets (Expedia), software and games (Microsoft, Shopify, Zynga, Steam), clothing and other manufactured goods (Victoria's Secret, Overstock.com, Rakuten), as well as food products (Subway, KFC, Burger King - in Russia). Also available for cryptocurrency are, for example, Playboy erotic products, premium accounts of the forums 4chan.org and reddit.com, business news from Bloomberg.com, cars in the Czech salon Alza and much more.

Although a number of well-known companies prefer traditional payments, they accept crypto payments through intermediary services like gyft.com (which sells Gyft cards for BTC). For example, Ebay online store, Wallmart supermarket chain, Starbucks restaurants, Uber taxi service, etc. Turnovers gyft.com are estimated at $ 25 million with a total of 38 employees.

Small young companies often use ready-made multi-currency gateways such as coinpayments.net. It supports dozens of currencies, it hosts about 400 companies. In addition to the mainstream, there are many specialized products. For example, crypto-armory.com sells cartridges, francvila.com - Swiss watches, directvoltage.com - 3D printers, electric motors, CNC machines, etc. Some new stores not only accept cryptocurrency, but also deliberately refuse Fiat. For example, crypto-armory.com, explaining its rejection of Fiat, indicates both ideological and narrowly pragmatic reasons. According to the store owners, cryptocurrency payments are technically and legally easier to accept.
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Cartridges from cryptocurrency store crypto-armory.com

An important trend of 2017-2018, in addition to the overall growth of the commodity market, is the reorientation of stores to multicurrency payments. If earlier most of them accepted only BTC, now, LTC, ETH, XMR and at least several other currencies have also become a sign of good tone.

So, while politicians solved the problem “it is impossible to forbid”, a huge market of goods for cryptocurrency spontaneously formed on the Internet Some of its members have multi-billion dollar capitalization. This market is very international. Most goods and services can be purchased even from Russia and other countries where the cryptocurrency is illegal as an internal means of payment, but is not prohibited as such. Today it is difficult to come up with a consumer product that cannot be bought for cryptocurrency.

The latest trend - support cryptocurrency smartphones

The first smartphone with a cryptocurrency wallet was the HYPERLINK HTC Exodus 1 , released in the autumn of 2018. Then came the HYPERLINK Finney crypto smartphone. And in March 2019, this smartphone was unexpectedly received by a smartphone from the largest South Korean company Samsung, the Galaxy S10. And although Samsung refrained from directly embedding the cryptograph in the standard delivery, you can install your Samsung wallet from the Galaxy Store.

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Galaxy S10 - Samsung's first smartphone with cryptocurrency support

There are a number of complaints from crypto enthusiasts to the Samsung initiative, among them the lack of Bitcoin support (BTC). At the moment, Samsung Blockchain Wallet supports only Ether (ETH) and the ERC-20 standard tokens and currencies created on its base:
Basic Attention Token (BAT), Chainlink (LINK), BinanceCoin (BNB), True USD (TUSD), USD Coin (USDC), Paxos Standard (PAX) and others.

However, from a political and public relations point of view, the appearance of the Galaxy S10 is a big event.

Firstly, a smartphone can attract new people to kryptorynok, who have greater confidence in the famous brand than in traditional bulky cryptocats. Now, many people are scared away from cryptocurrency only by technical difficulties, and smartphones have repeatedly proved their ability to promote to the masses what had previously seemed too complicated.

Secondly, this move by Samsung is a clear signal to both its own and other governments: big business is on the side of new technologies. South Korea has a reputation as a country that is not too friendly to cryptocurrencies, but it was her business giant who publicly showed a different attitude.

Third, the Samsung initiative is likely to be taken over by other leading manufacturers of communications. So, shortly after the release of the Galaxy S10, there was news that the cryptographic cards will soon be available in iOS Opera Touch, that is, the cryptocurrency can also be stored in the Apple iPhone.

All this creates excellent prerequisites both for the global legalization of cryptocurrencies and for the growth of the market due to the increase in the number of users.

Conclusion

So, despite the “roller coaster” cryptocurrency rates, some fundamental processes in recent years have developed steadily in the same direction: the expansion of the commodity market for cryptocurrency, the growing number of countries with a liberal attitude to cryptocurrencies, the adoption of cryptocurrencies as a strategic technology by all new industrial giants . The total number of citizens who have tried to work with cryptocurrencies is growing steadily, and new technological trends (in particular, crypto smartphones) can further accelerate this growth.

The only thing that can seriously destroy the cryptocurrency market is its global ban, but it seems unlikely. Now on Earth about 40 million bitcoin wallets. It is believed that on average their number doubles annually, which means that in 5 years it can reach a billion. And if now the global ban on cryptocurrency is unrealistic because of their profitability for developed countries, then by that time the ban will be impossible almost physically.

In the first part of the story, we gave arguments why investors should not be afraid of the 2017-2018 bubble: as a result, he showed not so much the riskiness of cryptographic investments, but their long-term viability. Today we talked about political and economic events that happened in parallel “behind the scenes” and in which there were no “falls” - only progressive development towards the construction of a crypto-economy. And in the next, third part, we will try to talk in detail about the specific financial reasons for the collapse and recovery of the market in 2018-2019.

Analytics Department at Trident