6 dynamics that will determine the future of cryptocurrency

Those who invest in cryptocurrencies such as Bitcoin and Ethereum often wonder about their favorite asset’s long-term prognosis. It’s a fair question, even for people who only keep a small percentage of their portfolios in crypto for hedging purposes. However, recent political, economic, and other dynamics are likely to have a profound effect on the long-term viability of crypto as an asset class. This is particularly true for investors and traders who operate as independent practitioners for their own accounts. Many home-based trading enthusiasts view cryptocurrency as a potentially rewarding asset that can serve as the centerpiece of an account.

No matter how you choose to structure your capital account or what techniques you use to earn profits in the markets, it’s essential to understand the main factors that have the greatest chance of affecting the future of alt-coins of all kinds, not just the major players like Bitcoin. Working with a reputable broker is one of the best ways to learn about how the alt-coin markets operate. Account holders who do cryptocurrency trading with AvaTrade have access to a large number of educational resources. The following summary can serve as a guide for new and experienced cryptocurrency traders and investors, as they try to navigate the turbulent decade of the 2020s. Note that no single dynamic will dominate the financial landscape. Instead, it’s highly probable that a mixture of factors will determine the short, medium and long-term health of the alt-coin markets. Here are the factors which are likely to determine the health of the alt-coin markets.


Regulation is the big question mark in the future of alternative currency. Whenever national governments make serious moves to establish new rules about alt-coins, the markets react almost immediately in a negative way. Currently, in the US, the UK, and Japan, to name just three examples, there are proposals in various stages of development that would more carefully control the cryptocurrency markets. In China, for instance, citizen ownership of digital assets like bitcoin is strictly regulated and, in some cases, banned. Outside of purely dictatorial nations, there are various levels of alt-coin control, including taxation, limits on use, and other restrictions.

ETFs (Exchange Traded Funds)

So far, the alt-coin market has responded favorably to the creation of ETFs. In most cases, any new asset that allows people to more easily acquire an ownership stake in digital currencies, is a positive development. When consumers buy ETFs, they gain most of the advantages of owning crypto without the high volatility that often comes with acquiring individual coins. The reason being that ETFs, by their nature, serve as miniature portfolios of a given assets class. As more exchange traded funds come into the digital currency space, expect to see more stability in the niche.

Ukraine-Russia Effect

So far, the war between Russia and Ukraine has not had a pronounced effect on cryptocurrency prices. However, the longer the conflict lasts, the greater the chance that international investors will begin to view alternative currencies as a more stable place to park their capital. Historically, whenever large military clashes damage a national currency, in this case, the Russian Ruble, many people search for alternatives such as gold, commodities, and alt-currencies.

Widespread Adoption

With each passing month, the strongest force in the crypto niche is general acceptance. Retailers, governments, institutions, and individuals are getting used to digital transactions. That means it’s just as easy to pay for your fuel, groceries, or home products with Bitcoin or Ethereum as it is to use traditional forms of money, like yen, dollars, or Swiss francs.

Day Trading

Day trading has done a lot to support the growth of cryptocurrency because traders enjoy the volatility, potential for out-size profits, and exciting price action within every session. Already, millions of individuals include at least one alt-coin in their day trading menu. Most often, it’s either Ethereum or Bitcoin, but others are making headway into the mainstream.

COVID and Its Variants

The COVID-19 pandemic, which began in China in December 2019, has already left a mark on the entire global financial system, including virtual currencies of all kinds. But, how will the pandemic continue to wreak its havoc, even as lockdowns, shutdowns, mask mandates, and vaccine laws remain in some places? In general, the pandemic caused problems for financial and exchange markets, which sent many people running to assets like gold and, in some cases, blue-chip stocks. One interesting development since 2020 and COVID’s arrival has been the increase in the overall price level of Bitcoin and other major cryptos. Apparently, enough investors view alternative currencies as a safe haven to give the new asset a luster close to gold in times of trouble.

Like any financial or business market, crypto currency will face challenges and fluctuations. How they are solved and overcome will determine the future of cryptocurrencies.

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