It has been said that you only get one chance to make a first impression. Perhaps the best example of this old saying is the cryptocurrency space.
From exit fraud and money laundering to unchecked code and high carbon emissions, the crypto landscape has spent most of the past decade breaking free of its infamous past. For many, disinfecting the decentralized ecosystem was inevitable – just a matter of when, not when. This mindset hampered the sense of urgency that should have been shown and may ultimately have contributed to the skepticism of established institutional investors.
Today, however, the decentralized economy has grown into something much bigger. Even in the face of market volatility, the peak of decentralized funding, craze for non-fungible tokens, and year-over-year rise in token prices have drawn the attention of the same investors who once shunned the decentralized economy.
How do we convert this institutional interest into institutional investment? While the answer may be simple, it will likely prove far more difficult to execute. Let’s take a look at what needs to be done in the months and years ahead to maintain general institutional interest and secure institutional investment.
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Given last week’s slump, it is natural to identify market stability as the most noticeable problem in cryptography. Make no mistake though, the primary (and most daunting) challenge for the crypto room is security.
According to CipherTrace’s cryptocurrency and anti-money laundering report, the number of serious crypto thefts, hacks and fraud incidents totaled $ 1.9 billion in 2020 – the second highest annual figure. The good news, however, is that this number is a drastic decrease from the $ 4.5 billion fraudulent events recorded in 2019.
Platforms across the space have taken significant and sustained steps to make the crypto ecosystem a safer environment for merchants. With crypto theft down nearly 60% in 2020, early signs suggest that the heightened security measures are working and the room is becoming far more secure.
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That in itself is an impressive achievement. However, it takes more than reducing fraud to pay interest on investments. It will take a concerted effort across the room to implement measures to deter nefarious activity. Platforms within the space have the task of demonstrating to institutions that the crypto space is no longer intended for unsavory purposes, but for a proven digital economy that cannot afford to be overlooked.
The main way to attract mainstream institutional investment is to thoroughly clean the space – a commitment to provide users of all skill levels with platforms that have been thoroughly vetted and put safety first. Secure trading platforms are a must to enable cross-ecosystem trading without the fear of a flawed platform or bad offers.
Mainstream institutional investors are driven by solid strategy in safe environments, not cycles of hype that lead to misinformation. In truth, the crypto space is maturing. However, in order for it to mature to a point that translates into institutional dollars, more sustained growth is required.
Cryptocurrency has long suffered from a usability problem. When it comes to financial investments, security and ease of use go hand in hand. Of course, users feel more secure when the platform is easy to navigate and the functionality is up to date. However, due to its rapid time to market and scaling, user experience or UX wasn’t the first priority for crypto exchanges, and clearing that perception from the eyes of mainstream viewers was an uphill battle.
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The early days of crypto were much more forgiving. Subpar UX was easy to miss as the majority of the crypto users were traders and speculators who had the technical know-how to manage the complexity. However, as less tech enthusiasts entered the room, exchanges and trading platforms focused on developing UX for consumers. While UX has undoubtedly improved since its inception, there is still a way to make transactions easier for more discerning newbies who are used to making UX seamless across existing trading apps.
Currently, the average cryptocurrency trader uses 3.36 cryptocurrency exchanges to buy, sell, and hold various currencies. This means the average trader will likely switch between more than three separate interfaces, perform three different background checks, and track spot prices on three exchanges. This is a tedious process even for the most experienced traders. The assumption that the room is ready to welcome new mainstream users into the fray is completely wrong.
Retail and institutional interest in the space has increased since the end of 2020. However, the existing platforms continue to be hampered by poor UX and are far from being user-friendly. To accommodate the influx of institutional users unfamiliar with crypto, it is important that platforms prioritize functionality and ease of use in order not only to attract but also to retain these users.
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Perhaps prematurely, the cryptocurrency space is causing significant waves among traditional investors. Given that major investors like Mark Cuban and Michael Saylor are normalizing cryptocurrency investments and the Coinbase cryptocurrency exchange is listed on the Nasdaq, there is reason to believe that the cryptocurrency will find its way into more investment portfolios. With this in mind, the transformation of speculators into investors depends on the ability of the crypto space to mature in a meaningful way.
Seen from the outside, the crypto room still conjures up images of twenty basement residents tinkering with GitHub and Reddit. While most of us know that this is far from it, it is up to those within space to demonstrate the long-term viability of what is being developed from within.
2020 accelerated interest in cryptocurrency in unprecedented ways. When more centralized laypeople step into the decentralized ecosystem, the space has no choice but to mature quickly. Rest assured, the space will mature to accommodate this new interest.
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We are in completely unknown territory. The rise of cryptocurrency into the mainstream spotlight has happened faster than many predicted. In order for institutional investors to take the cryptocurrency space seriously enough to invest, the ecosystem needs to become cleaner, more user-friendly, and more mature. The current iteration of space suffers from its checkered history, and it is up to those within the cryptosphere to reshape its image.
This article does not contain any investment recommendations or recommendations. Every step of investing and trading involves risk and readers should do their own research in making their decision.
The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
James Gillingham is the CEO and co-founder of Finxflo. James is involved in the development and implementation of strategic plans and company guidelines, maintains an open dialogue with stakeholders and promotes the company’s success. He is an expert in the management and implementation of high-level strategic goals with more than 13 years of experience in building, developing and expanding multinational organizations.