Virtual currency or cryptocurrency is a form of digital money that is unregulated and not issued or governed by any central bank or organization. While originally considered the domain of geeks and gamers—a simplified way to pay for in-game items like swords and armour—the currency is gaining popularity in many circles as a huge range of businesses start to see the value of quick, easy, digital transactions. Because of this, the Global Virtual Currency Market is growing with a CAGR of more than 8 percent 2013-2018.
Based on information from TechNavio analysts, we’ve compiled the good, the bad and the ugly of the volatile virtual currency market:
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The Good
There is no doubt that virtual currency is a hot topic with bitcoins being the current industry buzzword. Recent media prominence has given bitcoins a certain degree of infamy over other forms of virtual money, like Peercoin, Freicoin and Dogecoin.
Bitcoins, which came into existence in 2009, are becoming accepted globally due to benefits such as reduced transaction costs, no legal and regulatory hurdles, and quick, easy transfers. Increased use of social media and online games is still one of the primary virtual currency market drivers, and more accessibility to online games through mobile devices is driving up spending on virtual currency, leading to strong growth in the market.
Additionally, more and more vendors are starting to offer virtual currency payment options for goods outside the digital sphere. Real-world retailers and restaurants are starting to accept bitcoin payment, and bitcoin ATMs have even been rolled out in some countries, including Canada, Australia and the US.
The Bad
The online and mobile gaming industry is big and growing, with new games popping onto the scene daily. There are very low entry barriers into the online gaming and social media market, and new players are finding it easy to establish themselves and attract potential customers to their game and its related virtual currency. It’s a highly competitive market, where vendors are constantly having to add innovative features and game extensions in order to boost revenue from virtual currency. While a market this competitive is good for consumers, with so many companies fighting for a slice, the market has witnesses a gradual decrease in vendor revenues.
Another challenge to the virtual currency market is the presence of a lot of doubt about the safety of unregulated currency. This uncertainty, especially from governments, about the security and sustainability of virtual currencies has led to limited acceptance among end-users. This in turn is expected to hinder the growth of the Global Virtual Currency market during the forecast period.
Which brings us to…
The Ugly
So far, virtual currencies are unregulated. While this has allowed them to proliferate easily as a new, novel currency, it also means that there are some concerns that need to be ironed out. One such concern is that virtual currencies like bitcoins will be used for straight-up illegal activity. Bitcoins are facing huge criticism in many countries since they are not pegged to any real-world currency, and have been used in illegal transactions. Central banks and governments are keeping a close watch on bitcoins, while some have outright decried them as illegal.
Even some private organizations like Apple are still on the fence about alternative currencies. According to a recent PC World article, Apple recently removed the last of its apps for transmitting bitcoins from the app store, demonstrating a marked lack of confidence in the currency.
Additionally, there is talk of bitcoin regulation in some areas, with the state of New York leading the pack. These regulations seek to curtail money laundering and also, assumingly, appease government bodies. There is some worry, however, that too many regulations on virtual currencies will eventually hamper market growth.
Obviously there are still a few kinks to be worked out in the ever-evolving virtual currency market.
For more insights into this market, including factors affecting growth, as well as market challenges please see our 2014-2018 Global Virtual Currency Market report.
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