On Monday, January 11th, the most popular and widely used cryptocurrency Bitcoin crashed by 20%. The price of bitcoin reached $42,000 until it fell by nearly $10,000. Even cryptocurrencies other than bitcoin are failing.
Even during the beginning of the pandemic, bitcoin users received a great shock when the currency dropped by an all-time low of 60%.
The value of cryptocurrencies is fleeting and there is no security as such. Neither is anybody accountable for this online currency.
This poses a big question before us — what happens when these cryptocurrencies crash completely?
Issue With Cryptocurrency
Bitcoin has had a long history of crashes, so much so that after the recent crash, the U.K. financial regulator, FCA, warned people about crypto investments, “If consumers invest in these types of products, they should be prepared to lose all their money.”
Another immediate issue is that cryptocurrencies are not backed by the government or the world bank, in that case, is there any accountability regarding the security of the money?
Exchanges that take place with cryptocurrency are not safe and are prone to fraud, hacking, and theft. Cases of such breaches in security and losses in millions have been recorded before.
Issue of accountability also arises due to the fact that cryptocurrency transactions are logged in a blockchain ledger, which means that all the database is dispersed across the servers instead of being in hands of a central authority. This blockchain system can determine the security and anonymity of the transactions.
“According to MIT researchers, even with obfuscating techniques, holders of Bitcoin addresses can be identified in 60% of cases, largely due to leaked information from online stores and checkouts.“
The blockchain makes the data vulnerable, in turn dangering the user’s money.
The fact that cryptocurrency does not have a common body for regulating the exchanges and nobody can be held accountable for the frauds or the losses makes them extremely unsafe.
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How Come People Are Still Investing In Cryptocurrencies
Despite these alarming threats that come with cryptocurrency, people are still investing in them.
This is because many people believe currencies like ‘bitcoin’ to be a safety net against inflation. In bitcoin, only 21 million bitcoins can be created, unlike other reserves that can print more and more money.
Ironically, people view cryptocurrencies in a safe light because they are unrelated to the world finance market. They can rely on bitcoins, in case the economy is in recession. But this is not true.
It is true that the presence of ledgers frees people from any authority gaining control over the assets but it also exposes people to greater risks.
US dollar also seems to be decreasing in value against other currencies in foreign exchange markets, whereas in the cryptocurrency platforms, the U.S dollar prevails.
Retail purchases are also easier to many with bitcoin now, as most people are using it increasingly every day.
It is true that cryptocurrency provides a new monetary system, much like mobile banking, but it is far riskier and shady.
Even though bitcoin seems highly profitable and anonymous, the truth is that this currency or any other cryptocurrency can crash at any time and your data can be hacked easily, unless your blockchain is secure enough.
Bitcoin “has been and remains extremely volatile,” said Joe DiPasquale, CEO, BitBull Capital, a cryptocurrency-focused hedge fund.
Instability And Risk
Every year, the currency reaches a high before tumbling down by 25% at least as explained by Gavin Smith, CEO of Panxora. The prices can rise to $70,000 or fall by 40%, there’s no guarantee.
“Over a three-year period, this is a great asset. Even with quantum computing, there’s nothing on the horizon that indicates that could happen,” he said, “but it’s always dangerous to completely ignore the risk.”
Except for buying and exchanging, people also earn through the process of mining for bitcoins (cryptocurrencies) to get incentives.
Almost 400 obituaries have been written regarding the death of bitcoin, which means people who are mining for bitcoin are unable to find new bitcoins. It was recorded that in 2020, people found the fewest ever bitcoins.
The fact that cryptocurrency is unstable has already been proven without a doubt and it will be foolish to think otherwise. If any cryptocurrency were to crash completely, the users will end up losing all of their assets with nowhere to go, again, due to the lack of any authority backing them.
People invest in bitcoin in order to profit, but it is important to know that the risks are even higher and it’s better to cash out from time to time. Cryptocurrencies should be used with utmost awareness and security, only you can safeguard yourself.
Image Credits: Google Images
Sources: Forbes, Economic Times, Dataversity
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This post is tagged under: Bitcoin, cryptocurrency, crash, bitcoin crashes, accountability issue with cryptocurrency, money, asset, monetary exchanges, economics, transactions, economy, recession, safeguard, risk, danger, threat, hackers, loses
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