Bitcoin Slump? What’s the Cryptic message behind it?

In November 2021, Bitcoin reached its all-time high, climbing to an impressive $69,000. This was a significant milestone for the cryptocurrency, as it demonstrated the growing mainstream acceptance and popularity of Bitcoin. However, the following year, 2022, saw a significant downturn for the cryptocurrency, with its value dropping nearly 50% from its peak. This sudden fall in value has caused concern among investors, as they question whether or not the crypto market is stable and reliable. As of the time of this writing, Bitcoin is currently trading at around $35,000. The year 2021 has been a roller coaster ride for the crypto market, with sudden gains and falls. This volatility has caused uncertainty among investors, who are now wondering if 2022 will bring more of the same. Some experts predict that the market will stabilize and that Bitcoin will continue to rise in value, while others believe that the market is in a bubble and that prices will continue to fall. Only time will tell what the future holds for the crypto market.

It’s not a surprise that bitcoin has devalued so much, it has happened in the past. Some economists even called it another Ponzi scheme. The logic behind it was simple and obvious. Once there is a rise in the shares of a certain stock you lure potential investors. Then you drop the price on purpose to make a profit. And you repeat the process to make more gains and use people's naivety with the economic system. But all this creates panic; the new investors become more reluctant to buy the shares of such goods, deeming them unreliable and fraudulent.

This is not the case with bitcoin, in the past years, there have been many occasions where it lost almost fifty per cent of its worth. The environmentalist campaigned against its enormous use of electricity. Running a Crypto mine requires a lot of energy and that energy is mostly produced by burning fossil fuels. Many countries banned cryptocurrencies at that time and declared crypto as escalating global warming. Even China which ran almost fifty per cent of the crypto mine banned the currency.

For a layman to make a transaction with cryptocurrency is an arduous job, it’s not as simple as we make transactions with our day to day bank account. Despite all this most crypto investors don’t have a college degree. Despite all the uncertainties, there is no stopping in the crypto market. After the cryptocurrencies, we were introduced to the NFTs in 2013, which are just cryptographic assets. By the way, NFT stands for Non-fungible assets.

IS crypto the New Future:

One has to keep in mind that cryptocurrencies are digital currencies. The difference between traditional currency and crypto is that traditional currency is controlled by the central bank or reserve bank and the government plays its role as well. On the other hand, crypto bypasses all these third parties, your currency is stored on a remote server in the form of bits. One can ask simply that as we have a burst of technological revolution, will the currency be replaced by the same technology too. Our normal currency values depend on the level of trust we have in a certain currency. For example, The American dollar has the highest trust all over the world making it one of the most widely used currencies. There is nothing behind the American Dollar, no gold, no silver etc. Our trust in it makes it valuable. Can the same be the case with Cryptocurrency? At present crypto has won the trust of a small minority, but that day is not far when it will seep through the entire world. After all, once a human believes in a myth he wants to spread it to the rest of the world too.

There is strong resistance to blockchain technology from the Banks and governments. One can easily understand why the bank would resist such technology. Is crypto a threat to the Banking system? Of course not, there are many other ways in which banks can do their business. The whole fuss is about one myth replacing the other. Our concept of paper currency is just a myth just like the crypto myth. We have fought wars to defend our myths. Communism vs Capitalism, Democracy vs Autocracy, I can mention many more. The resistance to bitcoin and Blockchain technology is quite understandable. We can hope the resistance stays on the internet and other publications, it should not take the shape of war. With bitcoin touching its six months low, we will see a lot of new investors buying the currency. We might see another all-time high in a span of six months or so. These are mere speculative arguments, something else can happen too because bitcoin is a very volatile asset. And it will take some time to win the trust of the government and the people around the world. Once it does so, our economic system will be reshaped. It has already introduced us to the new concept of money and reshaping the economy will be its next step.

Will China be able to Curtail Cryptocurrency for Long?

China has banned all kinds of cryptocurrencies, alleging that crypto is facilitating the Capita flight out of the country. As the cryptocurrency is not centralised and is not controlled by any of the government, therefore it is being used in criminal activities such as fraud and illegal asset transfers. Since 2019 China has issued a crackdown on all kinds of cryptocurrencies and their mining sites. In late 2021 China announced that it will start issuing its centralised digital currency, which will be called digital yuan. Though digital yuan will be owned by the government and will be controlled by the central bank of China. India has followed China’s footsteps too by announcing the launch of the digital rupee by the end of 2022. Are all these indicators to tackle the crypto market? Or blockchain and a decentralised currency is the future of the world’s economy?

There is no doubt that the volatility of the cryptocurrencies such as bitcoin makes it one of the riskiest investments, hence creating a lot of speculation in the minds of the investors and financial experts. If we look at the size of the growth of digital currency, it is quite surprising. It touched the US three trillion dollars last November. But at the same time, it lost half of that at the beginning of 2022, when bitcoin and all the other currencies dropped in value by 50%. Bitcoin touched an all-time high in late last year, which was $69k and now it is trading at $35k. In contrast, the currencies which are regulated by the governments and are controlled by the central banks have rarely been through such huge fluctuations. If we look at the US dollar, it remained steady throughout the year, making it more steady and safe to retain or invest. There has been a period in the near past when bitcoin lost %80 per cent of its worth and experts are predicting the same again. It then will be a major blow for the block chain currency. It will send a tremor to the investors, investing in the volatile assets class.

As the value of the crypto is unpredictable, so is its future. With all the crackdown that is going on in China, we can predict that Blockchain technology will stay. The future of cryptocurrencies is unpredictable, it can go either way. Only time can tell, there are a lot of governments who have accepted coins and legalised its operation.