By guest contributor Kevin Toohey, General Manager, Atchison Consultants
According to Canaccord Genuity, the market for cryptocurrencies is likely to experience explosive growth in the next decade. They have forecast that cryptocurrencies will grow from a present value of US$117 billion to US$1,131 billion in 2025. However to put this in context, currently daily turnover in national currencies is around US$5,100 billion.
Cryptocurrencies do not pay interest. The values of cryptocurrencies are extremely variable so the return on a cryptocurrency is uncertain.
There are three elements which might provide returns on a cryptocurrency. Mining for new currency, movement in the value of the currency and transaction costs in verifying transactions or making cross currency movements.
There are three principal uses of a currency:
- a medium of exchange,
- a unit for accounting value and
- as a store of value.
Currency failures occur when their population of users lose faith in the currency’s ability to meet the above needs. Two common causes are:
- capital controls – which limit the ability to freely use a currency as a medium of exchange and
- hyper-inflation – where the material erosion of future purchasing power sees the currency losing is ability to store value.