It’s been a crazy few weeks as the crash of TerraUSD (UST) and Luna caused an unwelcome ripple in the worldwide cryptocurrency market, erasing hundreds of billions of dollars from the system in a few short days. The community is bracing itself as it continues to experience the fallout. Many are of the opinion that crypto just met its predictable moment of reckoning, while others continue to believe in it as the future of money, especially given the rise of the digital economy.
When Terra went into a tailspin, it naturally affected the whole crypto market. Not only is the faith in algorithmic stablecoins is at an all-time low, even the prices of “traditional” cryptocurrency like Bitcoin, Solana and Ether are still on the path to recovery. At the time of writing this post, Bitcoin was below $30,000. For those who haven’t yet looked into cryptocurrencies, NFTs, stablecoin and similar assets, several frequently asked questions may have resurfaced.
Who Uses Cryptocurrencies?
Several companies including Microsoft, Overstock, Tesla and Starbucks accept crypto payments. You can play online casino games using cryptocurrency. People who need to send money anonymously and securely without paying high transaction fees are also keen on it. Let’s not forget the ever-growing NFT gaming industry built on cryptography-based blockchain technologies.
You cannot play many of these crypto gaming titles like Axie Infinity, Decentraland or The Sandbox without first buying basic NFT items or goods to get started. For this, you would need a wallet with the digital currencies they accept. So gamers who want to try them out have no choice but purchase cryptocurrency.
In spite of the high investment required to join these games, they’re still appealing since a lot of them are play-to-earn (P2E) titles that often offer huge rewards which can be cashed out for real money. We surely don’t need to regurgitate the numerous reports of people leaning on P2E as their main source of income after the global pandemic struck.
Why Should Anyone Invest In Cryptocurrency?
Bitcoin has often been deemed a failed experiment due to its highly volatile prices — no one wants to spend it because it may explode in value and merchants are wary of accepting it in case it crashes in value. And let’s not forget the crazy amount of energy needed to produce one whole unit of it. That’s why we’ve been seeing rapid evolutions in this industry such as stablecoin, proof-of-work being held up against proof-of-stake chains and so on.
The fiasco surrounding the Terra stablecoin and Luna token does not prove that cryptocurrencies will fail because their value is based on speculation more than any other factor. It just means that the technology behind cryptography-based currency and transactions still needs more much development. The industry may even need some sort of regulatory oversight if allegations of the Terra crash being engineered for profit hold true.
This brings up the question of whether anyone should invest in crypto or related assets. Well, while the current opinion on NFT art is not favorable in general (don’t tell NFT enthusiasts this), digital money has many uses, as outlined above. If Bitcoin, Ether and other crypto coins survive the “Terrapocalypse”, there’s a chance of them gaining wider acceptance over time as more and more people gain a basic understanding of cryptocurrency, or at least trust it as much as they trust fiat money.
Cryptocurrency transactions are paradoxically high on privacy and open to viewing by anyone at the same time. But as long as you use new addresses for every transaction, it’s difficult for governments, companies or bad actors to spy on your purchases or sales. Apart from the anonymity crypto currency proffers, there are also the advantages of low intermediary fees for confirming transactions, the ability to send money across borders at any time of the day, independence from a central authority’s governance and high security.
Even if many experts argue that the value of cryptocurrency is pegged to nothing but speculation, as more and more companies do their bit to develop Web 3.0, we might not have a choice but to use cryptocurrency and ever-evolving digital tokens to participate in the metaverse. So buying a satoshi or two, even if it feels like too small an investment, might not be a terrible idea. But do remember to never invest more than you are willing to lose.
Investors in the crypto market are bearish at present and we don’t know how many potential adopters have been scared away by the Terra free fall. But when all is said and done, even skeptics may not be able to write off the concept of cryptocurrency given that the methods we use to assign value to any type of currency keep changing through the decades.