Cryptocurrencies... What future in light of price volatility and the rush of investors?
Bitcoin has proven its ability to harness computer software to provide a secure payment method on a global scale, without relying on greedy financial institutions that charge high fees.
Bitcoin virtual currency between quick profit and risk
If Bitcoin fails in its stated goals, it has become a vehicle for speculative investment
Since 2019, Bitcoin - the most popular and traded cryptocurrency - has witnessed great fluctuations that revealed many hidden aspects of digital financial transactions, so what is the future of these currencies?
In a report published by the American newspaper "The New York Times", Cornell University professor and researcher at the Brookings Institution, Eswar Prasad, says that the price of Bitcoin reached a record level this year, rising to more than $60,000, recording an eightfold increase. in just 12 months, before halving in just a few weeks.
The value of other cryptocurrencies such as "Dogecoin" also rose, before recording a more sharp decline, affected by the tweets of American businessman Elon Musk. But despite the recent drop in their prices, the total market capitalization of all cryptocurrencies has exceeded $1.5 trillion.
To a questioner to ask, will cryptocurrencies dominate our lives in the future? Should we invest in it? And do the huge fluctuations in their prices - which lost nearly a trillion dollars in their total value last May - portend problems in the global financial system?
No trusted third party
The writer points out that Bitcoin - which was invented by a person or group of people who are still anonymous today - aims to conduct monetary transactions without the intervention of a trusted third party, such as central banks or official financial institutions.
The importance of bitcoin was demonstrated in the midst of the global financial crisis of 2008, a time during which confidence in banks and governments was shaken. Bitcoin has made transactions easier by using digital identities and giving users a measure of privacy by not revealing their identities. But this factor paved the way for Bitcoin to be used in illegal activities, such as the recent cyberattacks aimed at extorting money.
With its increasing popularity, bitcoin has become cumbersome, slow, and expensive - according to the author - it takes about 10 minutes to validate most transactions using cryptocurrency, and transaction fees averaged about $20 this year, and the unstable value of bitcoin made it a medium of exchange. Unreliable.
According to the author, it has become clear that Bitcoin does not completely hide the identities of users, as the success of governments in tracking and recovering part of the funds paid to the “DarkSide” hacker group, has raised doubts about the privacy and usability of Bitcoin transactions.
Although Bitcoin failed in its stated goals, it has become a means for speculative investment, which is puzzling from the writer’s point of view, because it lacks any intrinsic value or any support from official authorities.
Bitcoin fans claim that its value comes from its scarcity, just like gold, where the coin’s algorithms enforce a maximum coin production of 21 million digital units (nearly 19 million have been created so far).
But scarcity in and of itself cannot be a source of value, and Bitcoin investors seem to rely on a deceptive theory, which is that to make profits from investing in this currency, you have to find someone who is willing to buy the asset at a higher price.
Cryptocurrency effect
Despite theoretical assessments, the author is unlikely that the collapse in the price of Bitcoin and other cryptocurrencies will destabilize the global financial system, in fact, banks have mostly stayed away from investing in these currencies as with any speculative bubble, and “gullible investors” are the most vulnerable to losses.
According to him, governments should warn investors against rushing to buy these currencies, as happened with the shares of the "GameStop" company recently, and remind them to assume their responsibilities in the event of a collapse in their value.
The writer adds that one of the disadvantages of Bitcoin is the use of huge amounts of computing power to mine it. By some estimates, the Bitcoin network consumes as much energy as Argentina and Norway, not to mention the mountains of e-waste used in mining operations.
On the positive side, the writer believes that Bitcoin has proven its ability to harness computer software to provide a secure payment method on a global scale, without relying on greedy financial institutions that charge high fees.
This has saved migrant workers a lot of money to send remittances back to their countries of origin, and technology has helped track payments in cheaper, faster, and easier ways for consumers and businesses.
Cryptocurrency Race
In light of the proliferation of cryptocurrencies, Facebook is planning to issue its own currency called "Diem" aimed at facilitating digital payments. This currency, unlike Bitcoin, will be fully backed by reserves of the US dollar or other major currencies, ensuring that it has a stable value. However, it is difficult to trust Facebook, and it is unlikely - according to the author - that the company will sacrifice its interest to secure greater welfare for the public.
In his view, the prospect that multinational corporations will one day issue their own unbacked cryptocurrency around the world is very worrying, because such currencies would not threaten the US dollar, but could wipe out the currencies of smaller and less developed countries.
The variables brought about by Bitcoin and the availability of many financial products and services at a low cost have stimulated central banks to issue digital versions of their currencies, and China, Japan and Sweden are already experimenting with digital currencies.
It may lead to a rise in capital appreciation in relation to financial information.
It could also be his role in the role of algorithms to exacerbate improvements in brands in the invoice.
Source: The New York Times