November 26, 2018

Have cryptocurrencies started affecting economy significantly?

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Till a few months earlier, the rise in cryptocurrency markets was seen as an insignificant event for the real economy. There were many jokes and satirical comments made by people who were unaware of the potential of cryptocurrencies. However, we must understand the changing scenario to find out if the cryptocurrency boom can be ignored without causing any loss.

Recently, some companies which had publicly traded stocks took decisions in favor of cryptocurrency and they got rewarded by the market in return. If this trend continues, then the people who have not joined the cryptocurrency bandwagon will definitely repent for their decision. One of the recent examples to consider here is Longfin corporation which witnessed a 2000% rise in its stock value when it announced that it had bought a blockchain based micro-lending service. The sheer power of an announcement through a press release by a company regarding a cryptocurrency oriented service shows that there is a high interest in investors for cryptocurrency related services. Then, there is also a growing scope for crypto writing services in order to cater to a growing number of cryptocurrency websites.

Let us try to find out some factors which might be propelling the crypto mania. Recently, on sites which track cryptocurrency values like coinmarketcap, we saw that some lesser known coins doubled their value within a week. One prominent logic which was attributed to this rise in prices of lesser-known coins was that the new participants in cryptocurrency arena made their investments in these new coins instead of Bitcoins because they could buy hundreds of units of cheaper coins rather than buying a fraction of Bitcoin with a few thousand dollars. Investment in cheaper coins is more of a psychological thing because getting a fraction of an established cryptocurrency like Bitcoin is not satisfying for most people. This entire process also causes a snowball effect where people invest in lesser-known coins in hopes to find out the next Bitcoin.

The participants in cryptocurrency arena will be joyful to see the rising trends across many Crypto coins, but it would definitely worry those people who were of the view that the day to day financial system would remain insulated from the ups and downs in cryptocurrency. By taking the inputs from the results witnessed by Longfin corporation, more and more companies might start linking to cryptocurrency services in order to gain higher investments from investors.

The entire clout of cryptocurrency revolved around Bitcoins initially, but it is eventually leading to the growth of newer and cheaper coins too. This success of cheaper cryptocoins will attract more investments because people will always hope to find out the next possible Bitcoin and hence the money flow towards cryptocurrencies will keep on increasing.  Therefore, it would be wise for companies to accept the cryptocurrency trend and to link with the cryptocurrency boom.

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