Cryptocurrency are digital medium of exchange, alternative to conventional currencies such as US$ or Euros. These utilize digital information exchange based on the principles of cryptography, to provide secure means of transactions and in many cases provides anonymity. In 2009, Bitcoin became the first decentralized digital currency, which leads to the introduction of over thousand other digital currencies in the market.
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Growing demand in conjunction with the decreasing supply of digital currency is among the prominent factor influencing the growth of the pricing of the cryptocurrency market
Digital currencies are classified as an asset or currencies depending from country to country. For instance, Bitcoin has 21 million units, given that the global population is around 7 billion, and even if around 50 million of the population adopt Bitcoin, this would require a premium price tag to suffice the users. Moreover, the creation of these currencies is constant and unchangeable, generating limited supply and higher costs. In 2016, Bitcoin witnessed an increase in the costs, mainly due to the imminent decrease in the supply of new coins.
“Energy required to secure the blockchain, mining difficulty, and their utility fuels the growth of cryptocurrency market”
Energy is utilized intensively in securing the blockchains. Most popular form, proof of work (POW) block chain requires significant amount of energy. According to a press release by bitconnect.co, the Bitcoin (BTC) blockchain requires energy equal to a small country for securing payment. Moreover, increase in blockchain security leads to increase in the mining difficulty. Many other factors fueling the market growth include the growing inclination of the population towards digital assets, increasing media reporting, number of investors, and security of the payments among others. From March 2017 to September 2017, the cryptocurrency market witnessed an exponential increase of capital to around 599.8%. Moreover, growing awareness and adoption of digital exchange, is expected to drive the industry growth over the forecast period.
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“Substantially large untapped potential base in the payment industry is expected to present strong growth prospects over the forecast period”
Increase of the digital currency value in the past was partially influenced by the growing transaction volumes, specifically for the BTC. BTC generated revenue of around US$ 130 billion in 2016, however transaction volumes are expected to witness considerable surge in the near future. However, Paypal witnessed volumes of over US$ 735 billion, whereas, Western Union volumes were recorded approximately 461% higher than BTC, pegged at over US$ 730 billion. Thus, it can be concluded that the overall utilization of the digital assets as a form of payment is still at its nascent stage, and expected to hold significant growth in the near future.