The cryptocurrency market is still in its infancy. Even the most mature digital currencies are rapidly evolving their code, long-term goals, and philosophical approaches. Regulators around the world seek to manage crypto transactions, ownership, and taxation. Amid the turmoil, crypto prices are more volatile than ever. And we ordinary investors are scratching our heads, trying to make sense of the whole mess. It is not easy to build a successful long-term investment portfolio in this constantly changing market.
However, there is light at the end of the tunnel (and I don’t think it’s an oncoming train). If you keep a watchful eye Bitcoin (BTC 2.00%), Ethereum (ETH 6.24%)and Ripple (XRP 3.46%) in the second half of 2022, I believe you will enter 2023 with a fuller picture of the future of the crypto market.
Ethereum after “fusion”
The Ethereum blockchain network is about to undergo a massive upgrade. In an event known as the “merger”, the old proof-of-work system will be replaced with a lighter proof-of-stake system. The upgrade brings several fundamental changes to how Ethereum processes transactions and paves the way for several platform upgrades in 2023 and beyond. Ethereum mining is on the way out, transactions will become faster and cheaper, and the revamped Ethereum ecosystem should be able to fend off the challenges of so-called Ethereum killers.
The merger is expected to take place in September, although an exact date has yet to be set. Investors should closely monitor how the game-changing platform upgrade works. First, of course, the actual change must be executed without a technical hitch. Next, we’ll see how crypto app developers approach the upgraded Ethereum platform. Finally, the change is undoubtedly good news for Ethereum in the long term, but the immediate market reaction is unpredictable.
Ethereum co-founder Vitalik Buterin estimates that the platform will be 55% complete after the merger, leaving plenty of room for future improvements. Everything that happens in September and beyond should give us clues as to where Ethereum is next – and how market makers will adapt as the decentralized computing platform grows.
Is Bitcoin ready to become a digital substitute for gold?
The first cryptocurrency in the market is also the biggest name, 13 years later. However, Bitcoin is still finding its place in the global economy.
Bitcoin started 2022 at a price of $46,700 per coin. This high price dropped to $17,700 in mid-May, and the price chart has continued to feel wobbly ever since.
This fancy volatility is not what Bitcoin investors want to see. Bitcoin was always designed as an electronic cash substitute, offering efficient payment functions and a reliable long-term store of value. Cryptocurrency may be on its way to achieving these goals, but no one would call it a safe deposit box today. Even Bitcoin evangelists such as MicroStrategy (MSTR -2.69%) CEO Michael Saylor agrees that the system has yet to reach its full potential and that long-term stability will not occur until a strong regulatory system is in place.
So when you look at Bitcoin’s price chart over the next few months — really, over the next two years — you should see it as a barometer of the progress of cryptocurrency regulatory efforts. This is a global problem, but the US market should lead the way with helpful regulation and a sensible tax strategy. Until the government and its supporting agencies clarify these details, Bitcoin will remain volatile. And as the regulatory system grows, the devil is in the details. Again, Bitcoin price movements should serve as an indicator of how these efforts are working.
Ripple’s legal troubles may set the tone for the whole market
And of course, we cannot forget the Ripple network and its XRP token. This discussion goes hand in hand with the regulatory reviews mentioned in the Bitcoin section. The Securities and Exchange Commission (SEC) filed a lawsuit against Ripple in December 2020, alleging that some of its executives engaged in unregistered offerings of digital securities. Most crypto exchanges quickly dropped their support for XRP transactions, and the legal wheels are still turning.
The Southern District Court in New York is due to issue summary judgment next week. This decision will not end the proceedings, but it should provide some guidance as to how the courts are addressing several important issues. Is Ripple’s XRP an investable security, as the SEC claims, or just a payment system, as Ripple claims? Should all cryptocurrencies be viewed the same way, or should the trading and spending rules for some digital coins be fundamentally different from others?
Whatever Judge Analisa Torres says in the upcoming summary judgment, her legal opinion will guide the industry-wide discussion of cryptocurrency trading rules. XRP sits at the epicenter of this conversation, hoping to resume trading with full trading on US crypto exchanges. Additionally, the judgment could shake the very foundations of the crypto market with repercussions for Bitcoin, Ethereum and others.
The long-term future of cryptocurrency investments is being determined right now. The lessons learned from watching Ripple, Ethereum and Bitcoin in the second half of 2022 will serve you well in the years and decades to come.