Bitcoin Is Crashing – What Does That Mean For The Asset?
In the last two years, cryptocurrencies like Bitcoin have taken a crazy turn: First it went to the moon, like insiders are used to call such dramatic price increases – and then the crash came. That has more than one reason.
If one had predicted two years ago that the price of the Internet currency Bitcoin would increase twentyfold within a few months, that would have been risky – similarly risky as the forecast that the exchange rate would fall again by 80 percent shortly afterwards. But that’s exactly what happened.
If you look at the market for digital currencies or crypto systems today, the picture is sobering. The mood among investors seems to be bad, which is reflected in the share prices. The Bitcoin, the “original cryptocurrency”, has lost a quarter of its value in the past seven days alone.
For other well-known altcoins, Bitcoin’s “children” so to speak, things don’t look any better. Little can be felt of the euphoria that drove the price of a Bitcoin up to $20,000 one year ago. A Bitcoin is still worth a little more than 4,000 dollars. There are reasons for this crash.
However, let’s not forget that Bitcoin is only 10 years old and has lived a massive general price increase over that period. Read more on https://bitcoin.org/en/posts/ten-year-anniversary. 4k is still enormous if you remember that it just hit $1000 a year ago.
Last Year The Euphoria Reached Its Peak
First of all, it is noticeable that the former crypto hype has largely vanished. Just one year ago, everyone was talking about crypt and blockchain. New cryptocurrencies and trading platforms were launched almost daily. Even two major American stock exchanges jumped on the bandwagon and introduced special futures contracts on Bitcoin.
On the financial markets, this meant a lot. Although there were always many critical voices, there was little to suggest at the time that the crypto wave would soon abate.
The “Blockchain” Itself Experienced A Similar Hype
The Bitcoin boom of the time was also driven by the technology behind many digital currencies: the so-called “blockchain”. This technical innovation, which can be described as a digital and previously forgery-proof account book, is still considered by many experts to be forward-looking.
Important industries, such as banks, insurance companies or even industry, are researching and testing the blockchain. They are hoping for economic advantages such as cost savings.
Now the interest is waning.
However, digital systems can no longer profit from this euphoria for the blockchain. Rather, it gives the impression that cryptocurrencies have been a kind of test field for the new technology for some time. In any case, the broad interest in digital systems has declined noticeably.
This can be seen, for example, from the fact that the demand for graphics cards, which are required for the production of Bitcoin, has dropped sharply. The large graphics card manufacturer Nvidia confirmed this only a few days ago.
Trading Platforms Are Hacked Again And Again
The slump in the value of cryptocurrencies is accompanied by further problems. Investors are repeatedly harmed because their accounts are cracked by criminals at relevant trading platforms and their credit balances are stolen. Digital initial public offerings (ICOs), in which companies issue securitised digital rights (tokens) to investors, have not always been transparent. Only recently, the US Securities and Exchange Commission (SEC) penalised two companies for not properly registering their issued shares as securities.
However, it must be said that there are many cryptocurrency brokers with excellent security standards, which means that they hold their funds in cold storage and 2FA authentification for withdrawals makes sure that no attacker who gets access to an account can actually execute withdrawals. That applies to world’s largest BTC margin trading platform BitMEX. All details about the Bitcoin Mercantile Exchange are summarized nicely in the comprehensive BitMEX test by BTS.
In addition, there are strong price fluctuations in almost all digital currencies. These fluctuations make them virtually unsuitable as alternative means of payment – and this was, after all, the original idea of Bitcoin and Co.
Digital currencies have always been a thorn in the side of central banks, which usually have the sole right to issue conventional currencies. After all, many crypto currencies also want to compete with conventional currencies such as the euro or the dollar. Perhaps this is why large central banks have been testing for some time whether they can make the concept of digital currencies usable as digital central bank money for themselves.
So far, the evil supervisor has not approved the index fund.
Bitcoin supporters are also waiting in vain for a major event: The admission of an exchange-traded index fund, also known as an ETF. Renowned investors such as the Winklevoss twins – known as former partners of Mark Zuckerberg – have been trying for some time to obtain SEC approval for such a fund. So far without any notable success.
The approval of an ETF in the USA would be a major step towards general recognition as a valuable asset – similar to the introduction of Bitcoin futures contracts. But at the moment it doesn’t look as if cryptocurrencies will receive this honor – and their exchange rates could benefit from it.