To those in the crypto world, the recent news of Bitcoin’s (BTC) value plummeting down to an all-time low below $20,000 no longer comes as a shock to them. After all, this cryptocurrency has gone through volatile fluctuations over the course of a decade since its inception. In fact, its current value is tottering on the edge of falling way below $18,500.
Binance’s purchase of rival FTX made Bitcoin fall more than 70% in value. This is what you call a “liquidity crunch.” The crypto world might expect tighter government regulations sooner than they realize. President Joe Biden expressed interest in regulating cryptocurrency by releasing an executive order. The executive order lays down the framework for examining the risks and benefits of crypto for the country.
The impending government intervention is a welcome development for the crypto world. Though with the tumultuous record of Bitcoin over the years, it begs the question: is Bitcoin increasingly becoming dangerous to dabble with?
Bitcoin Over The Years
When Bitcoin (BTC) first became official in 2009, it immediately stirred public attention. To compete with money as a legal tender, they created Bitcoin. Bitcoin is a cryptocurrency; the latter forms an all-encompassing concept of digital currency. While there are other forms of crypto, BTC remains the most popular and valuable digital currency.
An anonymous person who goes by the name Satoshi Nakamoto created Bitcoin. The first genesis block mined called Block 0 was mined on January 3, 2009, and it immediately raked up to 1.1 million Bitcoins within seven months.
Bitcoin also enjoyed a two-year monopoly on the crypto realm until its first competitors, Litecoin in 2011 and Ethereum in 2015, emerged.
The public welcomed Bitcoin in its early years as it marked the first use for retail transactions in as early as 2010. It was the trade of 10,000 BTC for two pizzas. In the succeeding years, over 1,000 merchants started accepting Bitcoin as payment such as WordPress, PayPal, Red Cross, and Reddit.
In 2011, BTC reached $1 in value which ushered in the crypto bull run period. It peaked at an average of $30 before crashing at $2 again. Bitcoin’s value grew in 2013 when it broke its highest pegged value at $1,000. It kicked off its steady rise in 2017 when the prices reached $19,000.
All in all, success describes Bitcoin’s first years. As part of the blockchain technology, the value of this cryptocurrency lies heavily on public speculation. The general positive outlook helped boost its value.
Its success can be attributed to the fact that BTC as a cryptocurrency has no governing body to manage its regulation. Investor sentiments determine its value. The public ledger accessible by the entire crypto world records its value.
However, Bitcoin is becoming riskier over the course of the years due to its extreme volatility. Mere public speculation can see its value nosedive. Real-time macroeconomic affairs can also have a greater impact on its value.
For instance, the Russian invasion of Ukraine has made BTC the main payment method for the Ukrainian government and NGOs to receive international donations. They raised over $60 million in the first few weeks. The war also prompted the call to ban crypto transactions with Russians, who also received a sum of $4 million donation through Bitcoin. Eastern Europe comprises around 20% of the overall crypto transactions in the world. It makes the war a crucial risk factor in the volatility of the Bitcoin market.
The Bitcoin volatility index indicates that cryptocurrency is volatile (VIX). In fact, Bitcoin mining is more associated with gambling than investing due to the addiction that can easily develop in crypto trading. Unlike gambling, which is controlled by governments, cryptocurrency is devoid of any type of intervention. Moreover, trading is accessible online 24/7.
In fact, Bitcoin is also used to gamble in actual crypto casinos online where traders can play anonymously. It keeps banks and other financial institutions from getting involved. The VIX shows that Bitcoin volatility was at its highest during its inception as people were just getting aware of it. However, consistent volatility marked its succeeding years. You can see the ups and downs in its value without any trace of stability period.
A bubble that keeps on bubbling through an uncontrollable market frenzy like there’s no tomorrow. This is what characterized Bitcoin’s high periods. Crypto users would chip in as much money to keep the crypto boom expanding until it bursts – and the pattern repeats.
Today, Bitcoin’s value is in limbo in the face of Binance merger with FTX. It elicited a mix of reactions from crypto users. Some expressed dismay while others remained clueless about the impending implications of the recent news.
Bitcoin In The Future
Bitcoin is in finite supply. In fact, the limit is 21-million BTC. Currently, there are over 19-million BYC in circulation. BTC won’t produce its final Bitcoin until 2140. However, analysts argue that blocks will group fresh transactions even after the limit is reached. Then, users will likely earn profits not from trading but from additional fees entailed in transactions.
As early as 2023, Bitcoin is subject to government regulation. The US government is currently developing a workable framework to penetrate the crypto world. When this happens, the crypto economy will obtain legitimacy and can thus compete with legal tender and be part of the formal economic market. Bitcoin may be able to achieve previously unattainable stability, but at the expense of the ideals it stands for: freedom.
With all these bright possibilities on the horizon, Bitcoin remains a risky currency. It warrants the utmost scrutiny from the rest of the world. Legal regulations do not prohibit any transaction that it makes dabbling with crypto feel empowering. However, it can also render all the crypto frenzy pointless, as its value rests solely on speculation without holding any intrinsic value.
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