" " Bitcoin and cryptocurrencies: what happens now ~ VISION ON PLANET -

Tuesday 28 December 2021

Bitcoin and cryptocurrencies: what happens now

 Bitcoin and cryptocurrencies: what happens now

Bitcoin and cryptocurrencies: what happens now
Bitcoin and cryptocurrencies what happens now

Bitcoin and the crypto markets started in December with extreme volatility. The number 1 cryptocurrency lost around $ 7,000 in the latest horror crash. In the meantime, BTC has risen slightly again - but the reserve currency still looks weak. Analysts believe further losses are possible in the short term. Meanwhile, a representative of the “old” financial world is sending a positive signal: the credit card giant Visa.

The Lakers' home game against the Brooklyn Nets in New York on Christmas Day was an introduction party for Crypto.com Arena, the new name of the auditorium formerly known as the Staples Center. The goal of the deal for the denomination change, which will reportedly cost the Singapore-based company more than $ 700 million, is to promote Crypto.com as the best way to buy and sell cryptocurrencies, as well as related digital goods.

Today, however, only a fraction of the world of television viewers could explain the difference between a Bitcoin gift card and an Amazon one, or between a non-expendable token and a Chuck E. Cheese token. The hype surrounding cryptocurrencies may be inescapable, but that doesn't mean that people understand how they work or why some of their values ​​have turned so wildly.

Mood like at a funeral "

Quo vadis, Bitcoin? At the weekend, the cryptocurrency was faced with the worst crash in weeks (data from Coinmarketcap.com): within 40 minutes, the asset fell from $ 52,163 to $ 45,032 - a decrease of more than 13%, panic in the markets. The recovery was immediate, but only minimal. Since then, BTC has traded in a narrow range between $ 48,000 and $ 51,900, currently at $ 49,670.

The next resistance on the way up is at $ 53k - this area needs to be broken now, then held. Investors are in the truest sense of the word fearful of whether this will succeed. It is true that there are often violent crashes and price setbacks in bull markets. In the 2017 run, for example, Bitcoin faced five corrections - each of more than 30%. The course was always able to recover shortly afterwards.

Nevertheless, every new decline has an enormous effect on the markets, or more precisely: investor sentiment. It is currently in the basement, as the "Crypto Fear & Greed Index" shows. The portal analyzes various sources (such as social media, Google trends) and then expresses investor sentiment in a number. 0 stands for the maximum value for fear, while 100 indicates extreme greed. The index is currently at 28 - “fear”. “Since the crash in May, the fear has not been so pronounced. The atmosphere is literally comparable to a funeral, ”comments professional trader Michaël van de Poppe.

Here are some of the basics to help you get up to speed. Do not interpret any of this as an endorsement of cryptocurrencies, which are currently not particularly useful as currencies or reliable as investments.

So what is its value?

Cryptocurrencies are worth what the market determines. Investors have placed more than 2 trillion in Bitcoin and others, presumably in the expectation that future investors will be willing to pay more for them.

One could argue that this is all sleight of hand, conjuring money out of thin air. Technically, each bitcoin started out as the payment that a person gave himself for performing the cryptographic work on a computer required to record transactions on the blockchain (an activity called "mining"). But their value depends on what people are willing to pay for them, which in turn depends on where people expect the price to go over time.

The bulls point out that the supply of Bitcoin is limited to a level that guarantees scarcity: there will never be more than 21 million bitcoins, while the world population is 7.9 billion and growing. In his opinion, the more that cryptocurrency is used, the more demand it will drive price growth.

The bears argue that sudden price swings (Bitcoin has seen two boom-and-bust swings in 2021 alone) will deter most people from jumping on the cryptocurrency bandwagon. They could also be vulnerable to price manipulation and the whims of investors stimulated by the dynamism of investments.

Is it really a coin?

As a medium of exchange, cryptocurrencies leave a lot to be desired. Few companies accept them as payment today for starters.

The list of places you can spend bitcoins includes a handful of tech companies, a couple of sports franchises, a handful of retailers and restaurants from around the world. There are alternative solutions like Purse, which allows you to exchange them for Amazon gift cards, but the need for such services underscores how poor a cryptocurrency substitute for dollar bills currently is.

One place where you won't be able to spend cryptocurrencies today is Crypto.com Arena. Steven Kalifowitz, Crypto.com's chief marketing officer, commented that the company is working on how it will integrate its cryptocurrency-powered payment app, as well as its other products, into the venue and its other partnerships.

Just as importantly, Bitcoin has not held its short-term value, a key attribute for any currency. The value of the US dollar rises and falls relative to the currencies of other countries, and its purchasing power declines over time due to inflation. But it does not increase 33% in one week, as Bitcoin did the first week of October, nor does it lose almost a quarter of its value in another, as it happened with this cryptocurrency in mid-May. A 2017 study found that Bitcoin prices are 30 times more volatile than the dollar, euro, or yuan.

So what is it?

For most people who buy cryptocurrencies, it is an investment. But as the roller coaster nature of digital asset markets indicates, it is unconventional.

Cryptocurrencies are not like corporate stocks, the value of which is, at least nominally, tied to something concrete (that is, the company's growth and profitability prospects). Nor are they like commodities whose supply and demand can be forecast.

Instead, they look more like a collector's item, like stamps, the value of which is largely due to their scarcity. There are no quarterly analysis or reports, production forecasts, or fundamental measures such as earnings per share to guide investors. Instead, they have to rely more on whatever evidence they can find on which cryptocurrencies have momentum in the market.

According to Kayal and Rohilla's article, researchers have observed a number of factors that appear to be correlated with Bitcoin values. One is geopolitical risks around the world: Bitcoin prices become more volatile as an index of those uncertainties increases. Interest rates after inflation and tax burdens, meanwhile, are "important in determining Bitcoin prices," they wrote. They also found that the prices of this cryptocurrency increased as the trading volume of the shares increased, but fell as the prices of the shares rose.


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