Predicting the Future of Crypto in the Next 5 Years

The crypto markets have grown rapidly in the past 5 years – especially from a valuation perspective. Bitcoin, for example, hit lows of under $4,000 in 2019. Bitcoin has since surpassed $70,000. Altcoins have experienced even greater growth.

So that begs the question – what is the future of crypto in the next 5 years? Read on to find out. We evaluate where the crypto space is heading. Not only in terms of price growth but developments in regulation, taxation, technology, and other key areas.

The Crypto Industry in 5 Years: Our Thoughts

There are many variables to consider when answering the question: What will the future of crypto be in the next 5 years? In our view, crypto is certain to continue its existing trajectory. This means increased adoption levels as each year passes.

Put otherwise, a larger percentage of the global population will own at least one crypto asset. Investments will likely be dominated by Bitcoin. Not only from retail clients but also from the institutional space. That said, we already have two cryptocurrency ETFs approved by the SEC – Bitcoin and Ethereum.

The next 5 years will likely see multiple other altcoins get ETF approval. This could include Solana, BNB, Litecoin, and Bitcoin Cash. In terms of valuations, some experts believe that Bitcoin could be worth over $1 million by 2030. This includes Cathie Wood – CEO of ARK Invest.

Wood believes that in the ultimate bullish scenario, Bitcoin could hit $3.8 million by the end of the decade. This would give Bitcoin a market capitalization of about $64 trillion. Currently, Bitcoin has a 55% market share of the broader cryptocurrency markets.

The same ratio would mean the total value of all altcoins is over $52 trillion. The next 5 years will also see societal developments, with a major shift from traditional finance (TradFi) to decentralized finance (DeFi). The result? Increased demand for smart contracts and thus, improvements in scalability and fees.

Whether or not Ethereum can handle the future of DeFi remains to be seen. If not, we’ll either see an increased reliance on layer-2 solutions like Base, Arbitrum, and Polygon. Or, increased market share from Solana, Avalanche, Cardano, and other so-called ‘Ethereum Killers’.

The next 5 years could also see an entirely new regulatory landscape. However, the borderless nature of crypto and blockchain means that a uniform approach is needed. This could see the development of a global standard setter, just like the FATF.

More than 200 countries are committed to FATF recommendations when drafting anti-money laundering regulations. This approach would ensure that crypto’s legal framework is consistent across the globe. Tighter regulation is almost certain to reach DeFi ecosystems too, considering their anonymous nature.

Where Will Bitcoin Be in 5 Years’ Time?

Bitcoin will undeniably still be the de facto crypto of choice in 5 years. This means Bitcoin will remain the largest crypto by market capitalization. It will also have the greatest number of unique wallet holders. This sentiment is almost undebatable.

Let’s take a closer look at Bitcoin’s possible journey in the coming years.

Bitcoin Halving

Bitcoin halving events are huge for crypto investors. It reduces the supply of new Bitcoins that are issued and awarded to miners every 10 minutes. The first three halvings (2012, 2016, 2020) saw extended bull runs in the months to follow. These bull runs lasted for 12-17 months, each creating new all-time highs.

Bitcoin’s fourth halving, which reduced the 10-minute mining reward from 6.25 BTC to 3.125 BTC, took place in April 2024. The expected bull run has yet to materialize. However, many experts believe it will begin later this year.

Potentially starting in Q4 2024 and lasting for most of 2025, as per previous cycles. As mentioned, Standard Chartered is one of the most bullish legacy institutions, with 2025 projections of $250,000 per Bitcoin.

This would give Bitcoin a market capitalization of about $4.5 trillion, making it more valuable than any US-listed company. But that’s not all – the fifth Bitcoin halving will happen in 2028. As such, this will likely inspire another extended rally. That halving will reduce the 10-minute mining reward to just 1.5625 BTC.

Bitcoin Development

Bitcoin is the most decentralized blockchain ecosystem. Unlike almost every other blockchain, it isn’t controlled by any single person or authority. This does, however, come with one drawback; making improvements to the Bitcoin code is unlikely, not least because it requires consensus.

Even if a consensus is reached, those in favor can’t force the wider Bitcoin community to accept those changes. This means in the next 5 years, Bitcoin will still be capped at just 7 transactions per second. What’s more, transaction times will continue to take about 10 minutes.

This would be problematic if Bitcoin was used as a day-to-day currency. With this in mind, we believe that demand for the Bitcoin Lightning Network will see a considerable increase in the coming years. This is the leading layer-2 solution for Bitcoin transactions.

It reduces the average transaction time from 10 minutes to seconds. It also increases scalability and reduces fees to micro-cents.

We might also see an increase in the BRC-20 standard. This enables ‘fungible’ tokens to be minted and stored on the Bitcoin blockchain. In theory, those fungible tokens can represent tangible and intangible items, just like NFTs.

Technological  Developments in the Crypto Industry

Innovation will play a key role in the future of crypto in the next 5 years. Let’s take a closer look at potential technological developments.

Decentralized Finance (DeFi)

DeFi is primed for significant growth in the coming years. This will revolutionize three key areas – savings, lending, and borrowing, especially in emerging countries, where traditional financial services are difficult to access.

• Savings: An increasing amount of capital will be injected into DeFi savings solutions, including staking and yield farming. These products enable investors to generate passive income on their crypto holdings. Interest rates are considerably more attractive when compared to conventional savings accounts. What’s more, investors retain control of their assets, rather than needing to rely on a centralized institution.
• Lending: The lending ecosystem is currently dominated by banks and other financial institutions. DeFi revolutionizes the space, allowing anyone to lend their digital assets for a competitive rate of return. Lending agreements are backed by smart contracts, ensuring transparency and protection from fraud.
• Borrowing: Similarly, DeFi will make borrowing facilities more accessible. Currently, the industry is dominated by overcollateralized loans. Meaning – borrowers only receive a percentage of their collateral deposit. DeFi will see an increase in uncollateralized loans in the future, allowing people to borrow funds without upfront capital.

The unknown factor is which blockchain ecosystems will have the largest DeFi market share. The obvious answer is Ethereum, considering its stronghold in the wider smart contract arena. However, many other layer-1 blockchains offer a faster, cheaper, and more scalable alternative.

CBDCs

The world’s largest and most influential central banks are almost certain to introduce Central Bank Digital Currencies (CBDCs) in the next 5 years. This includes the US Federal Reserve, the European Central Bank, and the Bank of England.

CBDCs are essentially an extension of traditional fiat money. The only difference is that they operate on the blockchain. This will mean cheaper and faster transactions for institutions and everyday consumers alike. However, while inevitable, CBDCs are an unpopular proposition.

And rightfully so. For a start, CBDCs will place even greater control in the hands of governments. This means governments will be able to control spending. Not to mention seamlessly block transactions and freeze account balances.

In the current crypto landscape, governments must go through financial institutions to achieve these goals. Often after a lengthy court process. CBDCs will also mean increased privacy fears. After all, governments will be able to view every transaction.

Layer-2 Solutions

Increased adoption means that layer-2 solutions could become a necessity – especially if Ethereum remains the smart contract ecosystem of choice. This means that smart contract transactions will initially be handled off-chain.

Not only does this solve Ethereum’s scalability issues but layer-2 networks also vastly reduce fees. Some of the leading layer-2 solutions are Arbitrum and Base. These ecosystems collectively have over $4 billion in total locked value (TVL).

Interoperability

Crypto innovation will also extend to ‘interoperability’ solutions. This means different blockchains will communicate and share data, without needing centralized intermediaries. Interoperability will play a major role in the Web 3.0 era, especially in the DeFi ecosystem.

Here’s a simple example of how interoperability works:

• Consider an investor holding Bitcoin.
• They want to invest funds into a decentralized staking pool on the Solana blockchain.
• Ordinarily, the investor would need to sell Bitcoin for Solana to access that staking pool.
• Not only would this be inconvenient but fees would apply.
• In contrast, interoperability would enable the investor to directly use their Bitcoin without selling.

Interoperability is also at the forefront of the Internet of Things (IoTs). This enables devices to interact with one another while remaining secure and decentralized. For instance, IoT will transform domestic energy usage, meaning increased efficiency on the blockchain.

Tokenization

The ‘tokenization’ of real-world assets is another innovative area to explore. Especially when discussing the future of crypto in the next 5 years. Put simply, tokenization allows physical items on the blockchain. The respective item will be backed by a non-fungible token (NFT).

• For example, suppose you own a property worth $500,000.
• That property could be tokenized – say 500,000 units at $1 each.
• Anyone can buy a token, which means part ownership of a property, no matter the budget.
• Tokens can be freely bought and sold on open marketplaces. This allows seamless transferability.
• Ownership is secured too, as tokens are transparently stored on the blockchain.

Tokenization can also extend to the lending and borrowing markets. For example, those holding real estate-backed tokens could use them as collateral to raise capital. This would coincide with DeFi protocols, ensuring end-to-end decentralization.

Not only will tokenization cover real estate but every asset imaginable. This will include everything from fine art and rare whiskey to sports memorabilia and cars. The possibilities are endless.

Green Initiatives

Bitcoin is a highly energy-intensive blockchain. It requires more energy consumption than entire countries with millions of citizens. This will likely not change in the next 5 years, considering proof-of-work’s huge power requirements.

However, outside of the Bitcoin framework, blockchain technology is also creating green initiatives. For example, Algorand is developing a carbon-negative mechanism. It achieves this by purchasing carbon credits, paid for by network transaction fees.

This means the Algorand blockchain has a positive impact on the environment while staying financially viable. In addition, some blockchains are being developed with energy efficiency in mind. Chia, for example, can be mined with unused disk space.

The Crypto Regulatory Landscape in the Next 5 Years

Many governments have been discussing crypto regulations for more than a decade. Very little has changed in that time frame. However, with increased adoption likely in the next 5 years, we could see a major sea-change in crypto legalities.

The most likely areas for regulatory change are discussed in the following sections.

The Digital Asset Market Structure Bill

The Digital Asset Market Structure Bill is currently being evaluated by the US Congress. The Bill seeks clarification on digital assets by creating specific categories. This will also help determine which regulatory agency will have oversight.

For example, digital assets assigned securities will be regulated by the SEC, while the CFTC will regulate crypto assets classed as commodities. The Bill will also provide clarity for crypto exchanges, ensuring compliance can be met without negatively impacting business models.

The Bill will also target stablecoins. It demands greater consumer protections, such as increased transparency and minimum reserve requirements.

AML in Decentralized Ecosystems

The next 5 years will likely see conventional anti-money laundering (AML) regulations extend to decentralized ecosystems. Especially as adoption and TVLs increase. For example, decentralized exchanges (DEXs) currently offer an anonymous trading experience.

Users can buy and sell crypto tokens without providing any personal information. Let alone ID verification documents. This is in contrast to centralized exchanges, which already implement existing AML requirements.

For example, opening a Coinbase account requires a government-issued ID and a selfie. Similarly, stricter rules could be enforced on decentralized wallet providers. Currently, the best decentralized wallets allow users to store crypto without revealing their identity.

In turn, users can send and receive funds in complete anonymity. This doesn’t align with existing AML rules, so regulations could be developed in the coming years. Especially in major economies like the US and the EU.

Global Regulatory Standard Setters

Regulating the broader crypto markets is challenging. Crypto assets are borderless, as funds are sent and received on a wallet-to-wallet basis. Meaning – the location of the transacting parties is irrelevant. This means the effectiveness of domestic legislation can be limited.

As such, we could see the creation of a ‘global standard setter’ in the next 5 years. They’ll be responsible for recommending legislative changes. Member states will then be required to enact these recommendations into domestic law.

Crucially, the same process is adopted in the AML world. As mentioned, the FATF’s recommendations have been adopted by over 200 countries. This will create a harmonized regulatory landscape – making the crypto industry a safer place to invest. Especially considering that crypto scams now represent a multi-billion dollar marketplace.

The Future of AI in the Crypto World

AI is already revolutionizing multiple industries and sectors. The crypto world will also be impacted.

Some of the key areas are summarized below:

Fraud Detection and Prevention

Crypto scams are increasingly becoming commonplace – especially on DEXs. The key issue is that anyone can launch a new crypto token. Scammers are protected by anonymity. No vetting process is needed – DEXs offer a decentralized listing process.

• Honeypot scams, for example, allow scammers to make changes to the token’s smart contract.
• This will happen once the token begins trading on DEXs.
• For instance, they could create a line that restricts anyone but the scammer from selling.
• The token’s price will capitulate once the scammer cashes out.

This is just one example – many scamming methods exist, including rug pulls, pump and dumps, and phishing attacks. AI can vastly help detect and prevent these scams. Advanced algorithms can assess a range of metrics, allowing would-be victims to avoid the project.

Trading Processes

Manual crypto trading will likely be extinct once AI reaches its true potential. For example, long-term investors will spend countless hours researching prospective projects. This will cover everything from the whitepaper and use cases to the tokenomics, roadmap, and development team.

Similarly, day traders dedicate substantial time to technical analysis. They must also place buy and sell orders, implement risk management plans, and carefully watch over the markets. In contrast, AI can perform all of these tasks in a matter of seconds.

Subsequently making manual research and trading processes obsolete. For example, consider that AI can analyze thousands of pricing charts simultaneously, comparing historical and existing trends with hundreds of technical indicators.

AI can almost instantly act on these analytical results. It can automatically place entry and exit orders alongside stop-loss and take-profit positions. Therefore, the future of crypto in the next 5 years will be an ‘arms race’ for the most advanced AI trading software.

Existing AI Crypto Projects

Crypto projects are already innovating in the AI space. One example is Fetch.ai. This project allows developers to create ‘agents’. These agents automate practically any manual task. Another standout project is SingularityNET, which provides a decentralized framework for other AI tools.

Each AI project has a native token, allowing anyone to gain exposure to its growth. In fact, AI crypto tokens are one of the best-performing narratives in the past 18 months. We expect this trend to continue in the coming years. Especially once the next bull run eventually arrives.

Other Crypto Narratives to Keep an Eye on

We’ve established that AI remains one of the hottest crypto narratives to watch. Other niches will also have a say in the future of crypto in the next 5 years.

Our top three picks are summarized below:

Real-World Asset (RWA)

RWA tokens will revolutionize the traditional investment landscape. Any asset, whether that’s bonds, gold, crude oil, real estate, or fine art – can be tokenized on the blockchain. The result? Investors from around the world, no matter their budget, will have access to assets that would otherwise be difficult to reach.

Moreover, investment minimums will become a thing of the past. After all, RWA tokens can be fractionized into tiny units.

For example:

• Let’s say a RWA project tokenizes a rare bottle of whiskey. It’s valued at $150,000 – a figure out of reach for most people.
• The project tokenizes that bottle into 75,000 units – each valued at $2.
• An investor purchases 100 tokens, totaling $200.
• The rare bottle of whiskey is revalued at $187,500 a few years later, an increase of 25%.
• This means each RWA token is now worth $2.50 ($2 + 25%).
• As such, the investor with 100 tokens has increased their investment from $200 to $250.
• They can sell some or all of their tokens on a secondary marketplace.

According to CoinMarketCap, there are 149 RWA projects with a tradable token. The total value of all RWA tokens in February 2023 was just $148 million. Today, the crypto sector is worth over $25 billion, down from its previous peak of $57 billion.

This means the RWA market has increased by over 168x in about 18 months. This figure could be considerably higher in the next 5 years. That said, RWA will face regulatory hurdles along the way; underlying tokens could be viewed as securities under US law.

Decentralized Physical Infrastructure Networks (DePIN)

The next trend to keep a close eye on is DePIN. This niche market brings traditional infrastructure ecosystems to the blockchain.

This includes anything from telecommunication and energy grids to cloud computing and graphics processing.

A solid example of how DePIN works is Helium.

• In a nutshell, Helium has developed a decentralized wireless network.
• Anyone can participate by deploying a hotspot (this is provided by Helium).
• That hotspot generates an internet connection. Anyone using that connection will pay fees.
• The respective hotspot participant will earn HNT tokens.
• This DePIN framework creates a win-win outcome for all parties.
• Consumers benefit from increased internet accessibility and lower connection fees.
• Participants can generate passive income for contributing to the ecosystem.

Crucially, DePIN is all about inclusiveness, transparency, and fairness. Especially for core services that should be a right, not a privilege.

Now, the DePIN market is still nascent, even more so than crypto AI. While CoinMarketCap shows 148 DePIN tokens, the market’s total value is just $18 billion. What’s more, most DePIN tokens trade at huge discounts when compared to recent all-time highs.

Meme Coins

You might be surprised to see meme coins on this list. Sure, most meme coins are indeed speculative, volatile, and fueled by hype and FOMO. Moreover, meme coins have little to no use cases or intrinsic value. All that said, meme coins remain an integral part of the crypto ecosystem.

For example, consider that some of the best meme coins, including Dogecoin and Shiba Inu, have millions of holders. Those holders range from budget-conscious newbies to fully-fledged whales. Crucially, meme coins bring communities together under one decentralized roof.

And, in some cases, meme coins can produce monumental returns in a short space of time. Choosing the right meme coin is the challenging part. Nonetheless, we expect meme coins to be just as relevant in the next 5 years as they are today. If not more so.

What Risks and Hurdles Will the Crypto Markets Face?

The crypto markets will face plenty of hurdles in the coming years.

Here are the main risks to consider when assessing the future of cryptocurrency:

• Counterparty Risks: The vast majority of crypto investments go through centralized platforms, such as exchanges. This presents counterparty risks. FTX, for example, filed for bankruptcy in 2022. It was one of the largest exchanges at the time. The bankruptcy resulted in billions of dollars in customer funds ‘going missing’.
• Increased Scams: Crypto-related scams continue to rise. The industry’s anonymity means there’s often no accountability when things go wrong. Rug pulls, honeypots, and pumps and dumps are just some examples. Law enforcement agencies must be given adequate resources to combat scammers.
• Reliance on Layer-2s: Some blockchains could become overly reliant on layer-2 solutions. Ethereum, for example, appears to be going that way. The risk here is that eventually, layer-2 solutions will require layer-3 solutions, and so on.
• Bitcoin and the Environment: Bitcoin’s proof-of-work consensus mechanism offers true decentralization and security. However, it’s incredibly bad for the environment, which is why Bitcoin is no longer accepted by Tesla. Limited solutions are currently being discussed, considering the Bitcoin world believes in ‘Code is Law’.
• Regulatory Hinderance: Regulating the crypto world can provide increased clarity for stakeholders. It can also create a safer and more transparent environment for retail clients. However, too much regulation can hinder the industry’s growth. Similarly, a lack of jurisdictional cohesion can make domestic regulations difficult to enforce.

Conclusion

In summary, the future of crypto in the next 5 years looks bright. We expect increased adoption rates, especially from the retail client space.

Technical innovation will also play its role, including interoperability solutions, DeFi, and the tokenization of real-world assets. Regulatory developments are also likely, including those covering financial crime and investor protection.

The next step is to decide which projects have the greatest chance of success. Check out our guide on the best crypto to buy for inspiration.

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