Bitcoin, stable coin, meme coins… cryptocurrencies have rapidly attracted the interest of everyone from asset managers, art mavens and tech experts. The number of diverse groups that view crypto as a major disruptive force is only growing as the uses of this innovative technology continue to multiply.
Central bankers around the world are working on activities to establish central bank digital currencies (CBDCs), with more than 80% of central banks being involved in pilots or other CBDC projects. A ‘digital euro’ project was announced earlier this year by the European Central Bank, illustrating the sweeping ambitions for CBDCs.
At the same time as central banks are looking for ways to introduce CBDCs into the financial ecosystem, so-called stablecoins are emerging as a potential tool to offer a relatively stable cryptocurrency as these digital coins are pegged to other assets like the US dollar and gold.
Not all cryptocurrencies have been created with a specific use case in mind, with countless meme coins now in circulation. Based on internet memes, these tokens are far from a joke – popular tokens such as Dogecoin and Shiba Inu have market capitalisations in the billions. As crypto emerges as a mainstream asset class, the role of often novel and playful coins is quickly turning from a niche to big money.
A cryptocurrency based on the hit Netflix show ‘Squid Game’ recently launched that saw its price explode by close to 2,400% in a single day to reach a market capitalisation of over $174 million. However, after concerns were raised around the viability of the token and so-called ‘innovative anti-dumping technology’ significantly limited the ability for holders to swap or sell their tokens, the price of these tokens fell from a peak of $2856 to zero.
While it’s unlikely institutional investors will start plowing money into meme coins any time soon, other forms of digital currency such as bitcoin and ethereum are developing into a mainstream asset class. Earlier this year, wealth management clients of JPMorgan Chase & Co. were given access to crypto funds, indicating a warming up to cryptocurrencies from some financial giants.
Viewed by some investors as an ideal way to diversify their portfolios, cryptocurrencies offer something that doesn’t correlate with other assets, leading to curiosity from those looking for opportunities in a low-interest world. Non-fungible token (NFTs) are the latest innovation that has captured the attention of everyone from McDonald’s to 14-year-old children, the latter of which made over a million dollars from selling NFTs.
Like any new technological innovation, people are working around the clock on projects to unlock the value of cryptocurrencies such as bitcoin, and see what parts of life and society they can transform. It’s still relatively early days when it comes to seeing the true impact of cryptocurrencies and understanding their many, many uses cases.
It’s anyone’s guess if NFTs are the future of art or simply a fad that will be overtaken by the next big thing. But these financial innovations are truly intriguing younger generations in the intersection of technology, commerce and culture.
By Finbarr Toesland, Editorial Contributor, VC Innovations