The cryptocurrency market exploded in 2017, growing from an $18 billion market cap to over $600 billion at its peak by the end of the year.
This massive growth led to new interest in the space and speculation about how big the market would become in the future. In 2018, cryptocurrencies fell into a sharp decline that has many people wondering if the bubble had popped.
Today, the industry is experiencing another major drawdown coming off a year that saw several bankruptcies and liquidations, let alone increasing scams and crypto theft.
While crypto’s problems look worse during the bear market, even during the better times, players and users in the industry faced several problems that have threated the adoption of cryptocurrencies.
Some of the key challenges the crypto industry faces today include the following:
Lack of Liquidity
The cryptocurrency market has a lack of liquidity because there are not enough buyers or sellers at any given time.
In a buyers and sellers market, when one side of the equation disappears, it causes an imbalance that requires time for the other side of buyers or sellers to enter the market.
This causes extreme volatility in cryptocurrency prices which may be very difficult for some people who want stability in their investments.
The solution?
Place trade orders with specific sizes ahead of time so as not to miss out on opportunities when they arise.
High Transaction Costs
One of the major challenges that cryptocurrencies face today is high transaction costs. This can make it difficult for cryptocurrency users to use them in everyday transactions.
One way that cryptocurrencies have been addressing this issue is by implementing technology that can limit transaction size and make it easier for more transactions to be processed at a time.
Another issue with high transaction costs is scalability, meaning how quickly a system can process transactions.
This becomes an important concern as cryptocurrencies like Bitcoin continue to grow in popularity. There are two proposed solutions:
- Off-chain solutions
- On-chain solutions
which both help provide scalability by allowing more transactions per second at a higher fee per transaction.
Lack of Trust in This Market
To deal with this issue, we must create a marketplace where users can trust each other. Implementing an escrow system would allow buyers and sellers to transact with confidence knowing that the transaction has been verified by a third party.
With most blockchain protocols, such as Dogecoin (DOGE) and Flow (FLOW), transactions are encrypted in such a way that they cannot be changed or hacked. This gives users peace of mind when conducting transactions on their marketplaces while encouraging more people to enter the cryptocurrency market as they will feel safer when making purchases or engaging in blockchain-based games.
Poor User Experience & A Lack of Regulation
Poor user experience encompasses several pain points that customers experience when interacting with crypto. These include:
- Scams
- Poor user interface (UI)
- Poor security
While the world of cryptocurrency has become very popular in recent years, it still remains challenging for people who are new to the market or have a general lack of understanding of how it works. There are many things that are unclear right now as well such as regulations.
A lack of regulation can be both good and bad depending on what country you live in, but most people would agree that it would be nice if there were clearer rules set out by governments. This way, cryptocurrencies could be used more easily and without any worry about breaking laws.
In conclusion…
Despite these troubles, there are many reasons to believe that cryptocurrencies will continue to grow exponentially over the long term as cryptocurrencies become more widely used by consumers and businesses around the world.
Nonetheless, these problems call for solutions that would help to make the industry even stronger going into 2023.
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