Cryptocurrencies have a nature of decentralisation and transparency
The financial industry worldwide is reeling under the pressure of the cryptocurrencies and blockchain technologies. The crypto asset class is led by bitcoin. The market capitalisation of of cryptocurrencies moved from a $15 billion market to over $150 billion market in less than one year and the top currencies posted a year-on-year growth of 10x to 20x.
These cryptocurrencies are popular due to their inherent nature of decentralisation and transparency. Cryptocurrencies can be held, traded, transferred without the need of a central authority and the entire transactions are stored in decentralised public ledger.
The fact that transaction details are recorded by any third- party authorisers and that these records are stored in multiple nodes, makes transaction immutable and easily accessible.
Cryptocurrencies made international asset transfer possible in near real time, which the much backed and well researched FIAT currency system still struggle to do.
A transfer of cryptocurrency can happen in near real time depending upon the network congestion and the fee paid for the network confirmation.
The fact that these cryptocurrencies are traded and accepted globally gives crypto currencies the characteristics of gold and they could even replace gold as the preferred hedging instruments in the years to come.
A slight shift in equity and commodity investment to crypto asset class can drive the crypto market cap to a trillion dollar market in a very short time.
The lack of understanding of the crypto asset class and the influence of political opinion on these instruments, keeps the market very volatile and will remain so for the near future. Irrespective of whether various governments endorses the crypto currency asset class or not, the crypto market is set to impact the financial markets deeply.
Banks are already feeling the pinch as the fintech industry is inroading the money remittance and lending markets with innovative blockchain based solutions. IMF MD Christine Lagarde has warned banks and financial institutions should adjust to the impact of cryptocurrencies.