Flight to Altcoins? Bitcoin’s threat to the global financial system

2020 could well be the year the cryptocurrency dream dies. This is not to say that cryptocurrencies are going to die completely, far from it. But for all the financial romantics who have applauded the rise of bitcoin and other digital currencies over the past decade, a reckoning is coming. Like it or not, the vision of a world in which these currencies free money from the clutches of central banks and other corporate giants is fading fast.

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It’s not that these coins have no place in the future of money. The encrypted blockchain technology that underpins them is extremely difficult for governments to control, making it unlikely that they will ever be removed. In any case, they have a valid role to play as a geopolitical cover: witness the rise of bitcoins and cryptocurrencies after the latest escalation of tensions between the United States and Iran, for example.

But 11 years after the remarkable beginnings of bitcoin, cryptocurrencies are a long way from supplanting the financial system. At the time of writing, the total value of all Bitcoins in circulation is $ 133 billion (£ 102 billion); by comparison, the market value of all the world’s gold is around $ 8 trillion, while the total value of major currencies around the world is roughly the same again.

The bias towards altcoins in the first weeks of 2020 may be the start of another bull run, fueled by renewed confidence or understanding in the space. Recent favorable business developments have bolstered prices, such as JP Morgan’s positive progress with the interbank payment system operating on the ethereum network.

The rise of altcoins is also possibly being driven in part by a growing number of coins entering the market. According to coinmarketcap, it now surprisingly exceeds 5,000. All other things being equal, this should reduce bitcoin’s dominance; this may be fueling now that confidence has risen in the sector as a whole.

There has also been momentum across the Coin base sector, the largest crypto exchange in the US Coin base is making a game for institutional investors by expanding its ability to store digital currencies on its behalf outside of the US. Known in the jargon as custodial solutions, Coin base’s offering just received two major industry brands from leading accounting firm Grant Thornton, so it may be drawing more institutional money into the sector.

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