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Bitcoin and other cryptocurrencies: Has the Bubble Burst?

These days, it’s challenging to even write about Bitcoin. There is a considerable likelihood that significant changes will have occurred in the time it takes to conduct research, write, edit, and publish a single piece. The volatile and lightning-fast cryptocurrency market is terrifying to try to keep up with. Even for individuals who have a financial stake in the market, keeping up can be challenging.

The Bitcoin price peaked in November 2021 at just under $70,000 USD per coin, and that was only around six months ago. About $15,000 had been requested for it the year prior. Many early backers saw their initial investments multiply by a factor of three or more due to the rapid expansion. The interest in cryptocurrency has certainly reached unprecedented levels. There was a sudden proliferation of online marketplaces where you could trade digital currencies like Bitcoin, Ethereum, Litecoin, and even Dogecoin. For Crypto.com’s Super Bowl commercials, Matt Damon encouraged viewers to “be brave” since “fortune favours the brave.”

To be honest, you’d have to have been hiding under a rock to have avoided being bombarded with crypto-something.

The Crypto Crash
Bitcoin, like all cryptocurrencies, has always had highly unpredictable pricing. It has had significant declines in the past, only to recover later. As 2021 came to a close and 2022 (so far) continued, the value of most cryptocurrencies plummeted. Bitcoin is trading at roughly $20,000 per coin right now, and confidence is dwindling rapidly. What transpired, then?

The investment market was in the same position as with any new product or technology: it had a lot to learn. Sadly, many people invested millions of dollars in these virtual currencies without fully understanding the risks involved. Some people did make millions by getting in early and selling at the peak. Unfortunately, there were many who believed the hype. All of their cryptocurrency assets would go “TO THE moon!” they were assured, with Bitcoin easily reaching $100,000 per coin (or Dogecoin reaching $1.00 per coin).

Many people are now sitting on enormous losses and wondering what they should do. Will prices eventually recover to the point where they’re profitable again? Should they try to salvage part of their investment and sell now? Or will cryptocurrency values continue to plummet until no investor is left carrying the bag?

Safety Concerns Regarding  
Bitcoin and other cryptocurrencies are the Wild West of online trading. There aren’t many checks and balances, so con artists can have a field day. According to a new report from the FTC, victims of cryptocurrency-related scams have lost over $1 billion in the United States alone since the beginning of 2021.

Some of them fell for attractive “investment opportunities,” only to see their money vanish into thin air. For others, sophisticated phishing or trading frauds resulted in the loss of their legitimate crypto assets. Nearly $200 million was lost in “romance scams,” in which con artists use dating sites to convince gullible people to transfer them cryptocurrency for a made-up emergency.

“Crypto has several features that are attractive to scammers,” the FTC report said. There is no bank or other governing body that can identify potentially fraudulent transactions in advance. Once a cryptocurrency transaction has been completed, the funds cannot be recovered. And the vast majority of people still don’t understand how cryptography functions.

Concerns About Privacy
The anonymity it offered was supposed to be a major selling point for cryptocurrencies. There were zero restrictions on it. It had no central authority. The government wouldn’t be concerned with how you used the money. Bitcoin was a dream come true for privacy aficionados. However, it wasn’t any of those things in reality.

Bitcoin’s anonymity, decentralisation, and privacy were the subjects of a recent academic investigation. Unfortunately, it was possible to “de-anonymize” Bitcoin users in some situations; therefore, the findings were not encouraging. They went so far as to imply that governments might take advantage of crypto transactions in criminal surveillance operations. The report also discredits the idea that bitcoin is completely decentralised, arguing that the market is more like a small system supported by a handful of powerful people.

Regulation of Bitcoin
Since millions of users have recently lost substantial amounts of money, there are mounting calls for some type of cryptocurrency regulation. Governments around the world are currently grappling with how to address this crisis. And, come on, no group of legislators aged 60 and over is exactly at the vanguard of innovative Web3 blockchain development. And it’s even more challenging than it sounds!

The key question at hand is whether or not cryptocurrency should be considered a security like a stock. Or is it more akin to a commodity that would be affected by futures contracts? Is it a form of money that can be exchanged for the dollar? The Responsible Financial Innovation Act is a measure that has been offered by both the Democratic and Republican parties. It would, among other things, establish the first serious guidelines for cryptocurrency regulation in the United States.

The bubble is being burst by outspoken critics.
While Elon Musk tweets about how you should buy a Tesla with Bitcoin or Dogecoin, other notable personalities are pouring cold water on the Bitcoin mania. Many well-known economists and extremely rich investors are avoiding cryptocurrency and advising others to do the same.

Warren Buffet, one of the world’s most successful investors, has publicly mocked Bitcoin. When asked if he would spend $25 to buy all the Bitcoin in existence, Berkshire Hathaway’s CEO famously responded that he wouldn’t because Bitcoin is “magic” and “doesn’t multiply or produce anything.”

Even well-known Wall Street trader and ex-hedge fund manager Nassim Taleb has softened his view on Bitcoin. He had supported the technology at first, but by 2021 he had sold all of his Bitcoin because of its unpredictability. Cryptocurrencies and NFTs have been in the news recently because of Bill Gates’ comments that they are founded on the “greater fool theory.” To put it another way, something’s worth is determined solely by how much more you can convince the next person to pay for it.

Questionable Business Conduct  
Bitcoin believers will tell you that their money is all about liberty and anonymity. However, when times are rough, several of the most prominent cryptocurrency exchanges just stop operating. Of course, in most cases, this is just a momentary setback. Bitcoin proponents talk a big game about complete autonomy and independence, but this isn’t quite it.

As the value of most major cryptocurrencies plunged in June 2022, the crypto network Celsius simply stopped all trade, including withdrawals. The 1.7 million users the site brags about are stuck doing nothing while their savings evaporate. Some customers were left wondering if they would ever see their money again due to the vague phrasing in the company’s official statement and Terms of Service agreement.

A few weeks later, Coinflex essentially replicated Celsius’s actions. These cryptocurrency markets are mostly unchecked by regulators and can operate as they like. Anyone considering sending them money should immediately disregard that red flag.

Instability of Stablecoins
The value of cryptocurrency fluctuates wildly. That much ought to be clear at this point. The question “what is crypto, but more stable?” was at some point posed. Stablecoins emerged as a result. To put it simply, a stablecoin is a cryptocurrency whose value is pegged to that of a fiat currency or commodity price. They are algorithmically priced to supposedly avoid the wild price swings witnessed with Bitcoin and other cryptocurrencies.

However, they are ineffective.

Binance, a cryptocurrency exchange, promoted one of the most widely used stablecoins, TerraUSD, as “safe,” “stable,” and “fiat-backed.” The price of one coin stayed (almost) constant at $1.00 USD during most of 2022. Midway through May, though, it began to recover, and it is presently trading at $0.01 per coin. The value dropped by 99 percent in a matter of days.

Over 2,000 investors have filed a lawsuit against Binance as a result of the decline, accusing the exchange of deceptive advertising. Luna, the companion coin of TerraUSD, too experienced a dramatic decline.

Thousands of employees are being let go by cryptocurrency firms.
The cryptocurrency sector as a whole is losing money, as if the real pricing of cryptocurrencies weren’t bad enough. There has been a dramatic reduction in staffing at many of the largest Bitcoin exchanges. Some employers are even taking back job offers they made in the past.

The cryptocurrency lending business BlockFi has announced the termination of 20% of its workforce, or roughly 170 people. In a similar vein, Crypto.com’s CEO recently announced the elimination of 260 additional positions. The personnel at a company called Gemini was recently reduced by 10%. More than 1,100 people were let go from Coinbase, one of the largest platforms for buying and selling cryptocurrencies.

Some of these firms have spent the previous 12 months purchasing the naming rights to major sports stadiums and paying for that pricey Super Bowl advertising, signalling a radical shift in the market. The outlook has dimmed, particularly for the recently unemployed.

The Future…
Who can say for sure? Bitcoin’s price has increased gradually over the past five days, but it’s still around $21,000 per coin. This is a far cry from the all-time high of $68,000. Optimistic crypto enthusiasts are urging others to “buy the dip” on the assumption that prices will recover. The possibility exists that they will.

Of course, it’s also feasible that costs will remain permanently lower than they were before. It’s possible that the days of doubling, tripling, or quadrupling your money in a matter of weeks are over. There is simply no way to know.

If fewer people are interested in or willing to purchase cryptocurrency, demand will fall. As a result, the price is frequently lowered as well. Still, those on the fence about Bitcoin investments may have been waiting for the current price drop to enter the market.

In Conclusiveness
It’s a gamble to invest in any cryptocurrency. The price fluctuations are too large to make them a reliable investment. The current cheap prices may make this a good opportunity to invest. On the other hand, it is also possible that prices will continue to fall. No amount of preparation or investigation can ever yield an accurate prediction.

Never invest more money than you can afford to lose if you decide to acquire Bitcoin (or any other coin). Buying cryptocurrencies may still be profitable for you. On the other hand, they can lose all value.

What do you think?

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