Cryptocurrencies have seen an explosion in growth over the past 5 years. Whilst most people have heard about Bitcoin or cryptocurrency in the early 2010s, 2017 was the year when cryptocurrencies truly went mainstream.
The Initial Coin Offering (ICO) boom, Decentralized Finance (Defi), and Non-Fungible Tokens (NFTs) have played a pivotal role in the rising public interest in the cryptocurrency market.
Despite its growing popularity, however, there are still some serious barriers to entry that could affect cryptocurrency adoption on a larger scale. Let's look at 3 common barriers to entry for cryptocurrency users in 2022.
Education
Education is a very common barrier to entry for crypto users. Whilst a lot of cryptocurrency investors are able to understand cryptocurrencies, NFTs, Defi, and how they work, there are still a lot of users who do not fully understand these technologies.
For example, there's a saying that goes, "when your barber or taxi driver asks you to invest in crypto, it's too late". This saying refers to the crypto market historically tanking soon after a period of very high commercial attention.
However, whilst a lot of people may be talking about the crypto market at times like this, they do not understand it. Many potential users don't know how to set up a wallet, what a private key is, what wrapped tokens are, what liquidity farming is, or how to use a decentralized exchange (DEX).
These new users are also very likely to go in with their investments instead of adopting a dollar-cost averaging strategy spread across multiple different tokens.
This issue is made worse by a lot of the information on cryptocurrency and blockchain topics being overly technical or full of marketing speak. It's almost like most projects are geared towards highly technical people or investors due to a lack of resources that explain these projects and protocols in a simple and easy-to-understand manner.
Due to this, many users don't understand how to use the different protocols and applications in the cryptocurrency space. They also don't understand how to vet projects or protocols, how to keep their tokens safe, or how to protect themselves from unnecessary losses.
When you combine this with social influencers urging new users to engage in margin trading with high leverage, or shilling shady crypto projects, you have a high number of users that are at risk of losing their funds.
A good way to combat this is by increasing the number of genuine and easy-to-understand online resources. We do have helpful communities on Reddit and Twitter, however, they are usually overshadowed by people with hidden agendas. The market needs to see an increased number of high-quality and understandable resources for new users to learn from.
Usability
Usability is another issue when it comes to barriers to entry for users, for example, browser extensions like MetaMask, whilst not difficult to use, are still a bit complex for non-technical users. However, this is one barrier that has improved over the years.
Exchanges, for example, have become more user-friendly. MEXC Global is a trading platform that recently enabled crypto purchases via bank cards globally. Since the platform is available in 180 countries, that makes it easier for investors to get into the crypto space, with users being able to buy up to $5,000 worth of crypto in a single transaction.
Another benefit is the familiarity of Visa and Mastercard payments which helps to reduce the barrier to entry for new crypto investors. Even decentralized exchanges, which were a pain to use in 2017, have become much easier to use with swap platforms taking center stage in 2020 and 2021.
Volatility
Volatility is another common barrier to entry for new users. Whilst the highly volatile nature of cryptocurrencies is responsible for the large potential gains, it also comes with very large downside risks for investors.
Take the algorithmic stablecoin TerraUSD (USTC) and its protocol token Terra (LUNC) for example, both tokens dropped over 90%, losing investors millions in the process. This collapse was due to a multitude of reasons with one of the main causes being rumored to be a coordinated dump by multiple parties.
You also have large investors and influencers who quietly accumulate lower cap tokens before shilling them to the general public and selling them to the new buyers, essentially using them as exit liquidity.
Volatility also comes from environmental factors, such as the performance of the stock market. New users in the cryptocurrency market need to be aware of the volatility and the risks that are present in the space, and only invest what they are willing to lose.
High risk comes with a high reward and large potential losses.
Conclusion
The crypto market continues to grow in popularity, bringing new users to the industry. With these new users, we need to have better educational resources, easier-to-use platforms, and increased awareness about volatility in order to reduce the barriers to entry for new users.