What are the factors that impact crypto market growth? Cryptocurrencies came into existence in 2009 and since then the crypto market has grown significantly.
In fact, the global crypto market, as per records, was estimated at $1.49 billion in 2020.
With such a rate of growth, this digital market is estimated to reach $4.94 billion by the end of 2030, a few industry experts believe.
The crypto market is supposed to grow at a CAGR or Compound Annual Growth rate of 12.8% from 2021 to 2030.
This is taking into account the effect of COVID 19 pandemic may have on this market which includes businesses closing down and being disrupted.
It has also taken into account the fact that the mining operations will be much lower during these following years due to restricted abilities to upgrade mining equipment with new hardware.
Now you may wonder why the crypto market is estimated to grow at such a substantial rate and what may be the factors that influence this growth.
A lot of questions may keep coming to your mind regarding the prospects of the crypto market.
All these doubts will be cleared in this article which will tell you all about the factors that influence the crypto market and its growth.
What are the Factors that Impact Crypto Market Growth?
Why is the crypto market growing exponentially over the years?
Is it the fact that cryptocurrency is a virtual currency that exists digitally and no one has any control over the issuance of new crypto coins and over the market operation?
Or, is it the blockchain technology that does not need to rely on any intermediary to authenticate a transaction?
Well, these questions are quite natural and are quite truly the most significant factors that result in the meteoric growth of the crypto market.
However, in addition to that, there are also a few other good reasons for the notable growth of the crypto market. These are:
- The operational efficiency of the current financial payment systems which needs immediate improvements
- The lack of transparency in their operation which involves an intermediary which make the process significantly slow
- The increase in demand for a faster, better and quicker remittances in the developing countries
- The well developed and increased data security with the use of blockchain technology and
- The better market capitalization of the crypto coins available in the market.
In addition to that, the rise in demand for cryptocurrencies among various major banks and financial institutions which enables them to make the best use of the untapped potential for the benefit of the emerging economies also plays a significant part in the growth of the crypto market all over the world.
All these factors are expected to offer a lot of profitable opportunities for expansion of the crypto market in the following years and reach an unbelievable height by the end of 2030.
However, though these factors play a major role in driving the growth of the crypto market all over the world, it is still hampered a bit in the developing countries due to lack of awareness among people regarding cryptocurrencies and its high implementation costs.
The Market Outlook
Now, in order to understand the factors that result in an exponential growth of the crypto market, you will first need to take a look at the point of view of the market itself.
Ideally, the hardware sector has got hold of the major share of the crypto market.
This is primarily the result of the immense increase in the demand for new hardware in order to upgrade the financial payment tools so that the performance of the software is enhanced.
On the other hand, the software segment is a bit slower in growth but it is expected to gain pace and the growth rate will be significant in the next few years.
This is a high possibility because software will play an important role in this period for managing the massive amount of data that will be generated in these years as well as in providing the users with more meaningful insights.
This will eventually help them to make more educated and better informed financial decisions.
In order to take a closer look at the crypto market, you should consider different regions of it.
Typically, the crypto market was more significantly dominant in 2020 in the Asia Pacific region.
This is expected to continue till the end of this decade as well.
The main reason behind this is the rise in the number of Bitcoin exchanges all over the Asian countries.
This has resulted in much more maturity and a much healthier competition in the crypto industry.
Several Asian banks and governments are now hiring blockchain experts and are pushing the use of blockchain technology behind Bitcoin.
They expect that it will create much more transparency in the financial payment mechanisms and will in turn also help in dealing with fraud that is so common in the financial sector.
There are several surveys made and reports created to find out the most influencing factors to drive growth of the crypto market in the Asian region.
All these reports include several aspects such as:
- The growth prospects
- The current and upcoming trends
- The fetters and
- A lot of global crypto market analysis.
It is these reports and studies that identifies the main factors and analyzes them all to understand the impact of them on the crypto market.
Based on a few such reports, there are five main forces that drive crypto growth in the Asian Market in particular. These are:
- The bargaining power of the suppliers
- The bargaining power of the buyers
- The intensity of competition among the competitors
- The challenges posed by the new entrants into the crypto market and
- The risks of alternatives available on the global crypto market.
However, crypto experts think that these are also some of the primary forces that drive the crypto market on the global scale as well which includes several different segments as mentioned below.
Overview of the Segment
The entire crypto market is divided into different segments. This differentiation is done on the basis of few specific factors that include:
Offering – The crypto market usually offers two specific segments: hardware and software.
The hardware segment is however divided further into smaller segments such as GPU, FPGA, ASIC, and others.
Moreover, the ASIC segment, which is in vogue now, is further divided into full custom, semi-custom, and programmable ASIC.
As for the software segment, it includes the several crypto exchanges, the different mining platforms, and coin wallets.
Process – As for the segmentation by the process followed, it includes crypto transactions and crypto mining process.
Types – The crypto market is further segmented by the type of coins available such as Bitcoin or BTC, Ethereum or ETH, Tether or USDT, Binance Coin or BNB, Cardano or ADA, Ripple or XRP, and lots more.
End User – Segregation of the crypto market is also done on the basis of the end users who are typically engaged in trading, e-commerce, banking, retail, and others.
Region – Finally, the crypto market is further classified on the basis of the region of operation which includes The United States, The United Kingdom, Italy, Germany, France, other European countries, North America, Canada, Mexico, China, South Korea, Japan, and other Asia-Pacific countries, and LAMEA countries or those in the Latin America, Middle East and Africa.
The crypto market is very competitive and has seen the involvement of several major banks, financial institutions, and some key players.
All of them implement different strategies to stay ahead in the race which result in a healthy competition.
If you follow different reports of competitive analysis conducted by different organizations on the strategies followed by these key players, you will see that they all vary in different aspects and features. These include:
- Product management
- Portfolio expansion
- Geographical expansion
- Agreements and contracts.
All these have enabled the key players not only in strengthening their foothold in this exciting and extremely volatile market space but also have helped them to increase and better their market penetration.
Analyzing the Impact of COVID 19
The COVID 19 pandemic has also laid a significant impact on the crypto market.
If you analyze this situation, you will see that it is mostly in the negative sense.
Different market analysis reports show that, COVID 19 has resulted in:
- A significantly diminished level of stability of crypto coins
- A notable augmentation in the level of irregularity and
- An enhancement in the volatility of the market on the whole.
All these have resulted in a significant decline in the demand for crypto coins all over the world due to the severe health crisis.
Add to that, the fact that the crypto market has a very low level of regularity in comparison to the international equity markets, it has caused a further drop in the demand of cryptocurrencies during this pandemic situation.
The Major Impacting Factors
However, in spite of the pandemic situation, here are some major factors that will result in a notable growth of the crypto market.
Superior data transparency due to the blockchain technology is one primary reason which eliminates dependency while making any transaction.
The protocols of this inventive Distributed Ledger Technology will improve organizational solutions to share payments transparently and safely across.
This will eliminate environmental effects and crimes and will also boost up crypto adoption by the masses in the future.
The emerging economies can expand their business by using the potential of cryptocurrencies and the significant opportunities it provides to them with its easier access and low barriers to entry.
This will not only help them to improve their financial services but will also help them to raise the capital required.
Also, the rise in the use of smartphones all over the world has also paved the path for a massive adoption of cryptocurrencies and thereby growth of the market as its positive consequence.
And finally, the most important factor is the price of the crypto coins.
As you may know, the price of crypto coins swing dramatically making them most volatile in nature.
These seemingly unpredictable price fluctuations attract the investors with high-risk tolerance to participate in crypto investing and trading.
This eventually results in the growth of the crypto market.
This needs some more understanding in detail. Ideally, the price of a crypto coin swings due to several factors mentioned below.
The supply and demand for a coin affects the price. If a particular crypto coin is scarce, it will have a high price as compared to those coins that are readily available in plenty.
Also, the demand for a scarce coin will be more which results in a price increase.
Participation of retail investors, economic situations, geopolitical events, inflation, and even media coverage can also result in a significant surge in demand for a particular crypto coin, and hence in its price increase.
The cost of production via the mining process also determines the price of a crypto coin, just like any other commodity.
This cost includes direct and indirect cost. The direct cost of production includes fixed costs or the infrastructure and electricity.
The indirect cost includes the difficulty level of the algorithm which can either slow down or expedite the rate of coin production to affect its supply, and thereby its price.
The number of competing crypto coins available in the market will also affect its price.
When people are aware of the capabilities of the alternative coins they will invest and trade with them more which will affect the price of the major competitor.
Government regulations and other developments around the crypto market will also affect the price of the crypto coins.
If people can trust their investments and believe that it will not invite any legal consequences or criminal activities within the financial jurisdictions, they will put in more money.
This will raise the demand for a particular asset class and its price, thereby resulting in the growth of the market.
Other factors that affect the price of crypto coins and the market growth are:
- News developments around this nascent ecosystem
- Hard and soft forks that changes the number of coins in circulation as well as the perception of an investor on cryptocurrencies
- The internal governance policies that are set by a cluster of core developers
- Protocol modifications which also affects the number of coins in the market and
- The rewards offered to the crypto miners for confirming and authenticating transactions to the blockchain.
Therefore, it can be safely said that the growth of the crypto market is typically influenced by the utility of the coins.
This is enhanced by the companies by making a crypto coin more valuable and usable within the given environment.
The companies do this by offering different things to the users such as, mining rewards, payments of dividends, voting rights, and more.
They also try the best ways to make them a safe and trustable mode of exchange in the blockchain network by enhancing the perceived and literal value of the projects.
This is best done by improving the progress probability of a project to make it more viable overall.
Project management is also an important aspect in this regard.
If and when a particular crypto project keeps on developing continually, makes lucrative partnerships, crosses one milestone after another, and produces user-friendly software, it is considered to be more viable.
It will add more value to the crypto coins as well as the market on the whole.
Market capitalization, or market cap as it is normally called, is also an important factor that determines the growth rate of the crypto market when compared to its number of years of existence.
This is the simplest indicator of the value of a crypto coin in the market which is the figure derived by multiplying the price of each crypto coin with the total number of coins supplied in the market.
Last but not least, no matter how irrelevant it may seem, the number of node counts also tells about the growth and value of crypto.
This is because node count actually indicates the number of wallets that are currently active on a particular blockchain.
Larger the number of nodes, the more active and stronger the community is.
All these factors impact the growth of crypto markets, which, as of now, point towards a favored direction.
However, the prospects of growth of the crypto market have benefitted everyone at large.
As for the stakeholders, they have been able to enjoy some significant benefits.
They have been able to find newer and better investment pockets to make the best use of.
With a little bit of research and market analysis, they can make an estimate on the future of a crypto coin as well as find those opportune moments that are on the offing.
Also, they can now judge the financial competency of the crypto industry in the following years and also analyze the size and growth of the market more quantitatively by knowing the different key drivers, opportunities and restraints.
They can now make trades based on the potency of the buyers and sellers participating in the crypto market by analyzing the market trends.
Benefits for the Crypto Market
As for the crypto market at large it is benefitted by the participation of a large number of key players.
Some of the major players include and are not limited to:
- BitFury Group Limited
- Advanced Micro Devices Inc
- Coincheck Inc
- BTL Group Ltd
- Intel Corporation
- Xilinx Inc
- Ledger SAS
- NVIDIA Corporation and
- Xapo Holdings Limited.
This enhanced participation by the major players will result in a mass adoption of crypto coins by the general public as a daily mode of making payments for goods and services they buy in the future.
This will eventually benefit the crypto market facilitating its further growth in the following years.
Finally, to forecast the crypto market in this decade, according to all analysis reports, the CAGR can be anywhere around 12.8% from this year onwards till 2030.
However, during this forecast period, it is the Asia Pacific region that looks poised to grow at a CAGR as high as 14.5%.
The value of the crypto market by then is estimated to be as high as $4.94 billion, as said earlier.
Though Bitcoin has always and will still dominate the crypto market and influence its growth down the lane, but the tech giants, governments’ attempts, and participation of the major players determines the future growth prospects of it.
I have special interest in crypto and intend to help common people to gain knowledge about the digital asset as well as its potential. Follow Me at Linkedin.