As new technologies, innovations, and trends arise, they permeate every sphere of our lives, including finance. How are the recent developments affecting the way we transact and invest? And what do they mean for the financial world in the years to come?
We look at the possible answers to these crucial questions with our 5 insights into the global financial marketplace and its potential future.
Stabilizing Cryptocurrency Markets
Cryptocurrency is older than many people realize. Although often hailed as the start of crypto, Bitcoin was not the first cryptocurrency. It did, however, spark widespread interest in decentralized finance. But despite the allure of making money trading with ‘digital money’, many Bitcoin investors lose money.
Cryptocurrencies’ extreme price volatility is the main culprit here. This is where crypto market making comes in. It involves the continuous buying and selling of digital assets, to provide the cryptocurrency market with liquidity.
Crypto market makers are intermediaries that facilitate trading and reduce price volatility. Because it addresses one of crypto’s main failings, crypto market-making will continue to play a pivotal role in the global financial marketplace.
Embracing the Integration of AI
AI has changed how we do many of our daily tasks. AI and machine learning have become an everyday part of online content creation, customer care, corporate digital asset management, and even hazardous tasks in the industrial sector. And it hasn’t stopped there. It’s time to embrace AI integration in finance.
AI-powered Stablecoins are already proving a possible answer to the volatility of cryptocurrencies. They rely on advanced algorithms to maintain a stable value, typically pegged to fiat currencies like the dollar or commodities like gold.
This is just one way that artificial intelligence technologies meet challenges in the financial marketplace. And it’s certainly not going to be the last. As AI technology advances, it will become more commonplace in the financial sector, forever changing the way we buy, sell, bank, and invest.
Implementing Sustainable Finance
Initiatives like the European Green Deal have led to a ‘greening’ of everything, including the business world, in a bid to save the planet. But what does this mean for finance? Sustainable finance entails considering environmental, social, and governance (ESG) factors before making investment decisions.
Businesses and finance corporations are waking up to this new way of looking at profits. Because the world should not suffer for the sake of financial profit. It is still possible to turn a healthy profit by investing in businesses with environmentally friendly practices.
Is this enough? No. While looking at what other companies are doing for their environments and communities before investing in them is wise, that’s not where it ends.
Investors need to look at their business practices and take up the challenge for more responsible, environmentally supportive, and ethical ways to do business. And use these same criteria before choosing partners, or accepting business funding yourself.
Address the Challenges Behind the Growth of DeFi
The path to decentralized finance, once a dream and now becoming a reality, is not always smooth. Of course, there are some advantages. Cryptocurrency-backed transactions allow immediate transactions, without bank oversight.
However, decentralized finance is not always the utopia it appears to be. Price volatility continues to be a thorn in the side of crypto. Due to its general anonymity and lack of consumer protection, transacting and investing can be risky.
Cryptocurrency trading, indeed decentralized finance in general, lacks coordinated regulation. This makes it attractive to individuals trying to avoid paying taxes or committing financial fraud. So, before we dream of a world without traditional banking institutions, we must address these challenges.
The Birth of Green Digital Assets
Green investment is the investment in activities associated with environmentally friendly business practices and natural resource conservation. Green mutual funds, green index funds, green bonds, green ETFs — these are just a few of the ways investors can support green initiatives.
Some suggest that Blockchain tech could meet the need for digital monitoring of green investments. Banks and brokerages could use it to digitally monitor the proceeds of such investments and inspire greater confidence in investors. It could also lead to the birth of new green digital assets.
Is this the way forward for true ‘green’ finance? It might be. And it might just be the solution to many of the problems in the wilderness of decentralized finance. But for now, the true question is this. How do we bridge the gap between centralized and decentralized finance, for a smoother transition to the brave new financial world?