LEARN ABOUT THE WORLD OF INVESTMENT BANKING
Future of Finance
This page will discuss some of the hot topics in the world of finance right now that many people predict will takeover.
Cryptocurrency
It is a digital currency that operates on decentralised technology, a blockchain, and uses cryptography for its security.
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Cryptography is advanced code that is practically impossible to hack, counterfeit or double-spend. All the cryptocurrencies in the world exist on computers from all over the world, which means that they are not controlled by one single authority. The main cryptocurrency currently dominating the market is Bitcoin (BTC) and it was also the first created.
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Blockchain technology is instrumental to the functioning of cryptocurrencies and has been adopted by many major companies including JPMorgan Chase. It is essentially a set of blocks connected together with each block holding data on transactions of the cryptocurrency. Each transaction is verified by a number of members that depend on the network used and also every member of the block before the check is finalised. This long check makes the system very secure.
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Currently, many investors are wary of cryptocurrencies due to their high volatility. They also get a lot of stick for having high energy consumption rates in the mining process as well as being involved in criminal activities.
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The future for cryptocurrencies is globally disagreed upon. In El Salvador, it is an official currency whilst in China, all transactions relating to cryptocurrencies are banned. However, those in favour want a global framework that establishes regulations for the use of crypto similar to the work being done under the Biden administration.
Algorithmic Trading
Algorithmic Trading is the process by which you use computer to trade. You define a set of parameters that the computer will act upon automatically when they are met and either buy or sell in the market. It requires no human input for the computer to do this, making the system faster, more efficient and gets rid of human error.
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The future for algorithmic trading holds potential growth into new markets such as cryptocurrencies. Machine learning and AI integration will also play a bigger role as it would allow for the analysis of vast amounts of data and from that adapt new trading strategies that go with the evolving nature of the markets. They can reveal more complex patterns that would no be as apparent to human traders.
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High Frequency Trading (HFT) will continue to be prevalent. HFT strategies involve extremely rapid trade execution, especially in highly liquid markets. Growth in the sector as well as competition is expected to drive innovation and technology in order to reduce latency and improve execution speeds.
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Another possible outcome is that it makes its way into retail trading and is utilised by independent investors. However, all of this growth would come with increased regulations and more required security. This is to ensure market stability, transparency, and fair competition. Firms that engage in algorithmic trading will also need to employ more robust digital security measures to protect themselves against cyber threats and system failures.