Cryptocurrencies emerged a decade ago, today the global crypto market cap is $1.50T. Being a highly volatile market, it has paved a way for one to become a millionaire in a short span, legally!
But last few weeks have been painful for crypto investors, the market has not witnessed such a major crash in a long while.
The market might take a decent amount of time to recover, still, there are a few pretty good reasons why the cryptocurrency bubble is about to burst.
Manipulative market
The motive behind cryptocurrencies was to have a decentralized market but, is it really decentralized? Tesla CEO Elon Musk single-handedly has been pumping Dogecoin which rose by about 5000% from the month of December 2020 when he tweeted about Dogecoin which was later backed by celebs like Snoop Dogg and Gene Simmons.
On Elon’s tweet about discontinuing bitcoin to purchase Tesla vehicles, bitcoin dropped 40% from its all-time high(ATH) and Bitcoin is still in the red.
Governments ban on Crypto
China has banned financial institutions and payment companies from providing services related to cryptocurrency — news article dated May 18, 2021
This led to a further drop in Bitcoin and the market is still witnessing the bloodbath as the majority of Bitcoin mining happens in China. China has been uncertain about cryptocurrency in past years too.
Countries like Turkey, Morocco, and Algeria have banned crypto just a few years back. In India, although Supreme Court has made crypto legal, top banks like HDFC and SBI have warned customers on crypto transactions.
Scam, scam, scam!!
A survey from Federal Trade Commission(FTC) claims that Americans have been victims of scams estimated to be more than $80 million in cryptocurrency investment. Scammers have also evolved along with the technology, right from luring investors into ‘Ponzi schemes’ to impersonating themselves as Coinbase or Elon Musk himself.
Unlimited Supply
Cryptocurrencies like Dogecoin have an unlimited supply. According to the very well-known economic mantra, “Supply and demand are inversely proportional”. With such everlasting supply, the sustainability of such cryptocurrencies still remains a question.
New day, new Coin
As of January 2021, there are more than 4000 cryptocurrencies in the market. A person with the skill to code can develop a blockchain and can bring a new digital currency into the market every now and then, making the market more saturated.
With such a diluted market and diversified investments into the market, there comes increased competition for other flourishing coins. Hence, occupying the room for other coins to grow.
Digital currency a real pollution
The reason why Tesla CEO, Elon Musk tweeted, “Tesla will no longer accept Bitcoin as a payment” was an environmental concern. According to the Digiconomist blog, one bitcoin transaction can alone leave behind a carbon footprint of 359.04 kgCO2.
Over a period of a year, Bitcoin consumes more energy than all but 38 countries, including Finland, Chile, and Austria.
Cryptocurrency has plenty of reasons why the bubble might burst but, there’s a positive side too. Covid-19 pandemic made people add crypto into their portfolio — an option to earn high gains in short term, then why not?
Caveat: Crypto Market is highly volatile, it can give you high gains as well as high losses, invest with caution and complete knowledge.
Low Transaction fees
Transaction fees can be whopping high if you are doing a lot of international transactions, the time it takes to complete such a transaction is a different story.
Cryptocurrency transactions are peer-to-peer, that takes place in a few minutes with complete confidentiality and security, hence reducing the transaction fees manifolds.
Smart contracts
Naysayers often claim that cryptocurrencies have no real-world correlations but, being a digital currency it does have many digital applications. A smart contract is one of them.
In laymen’s terms, a physical contract coded into a program that executes itself upon fulfillment of an agreement is a Smart Contract.
Smart contracts are decentralized, secured, and cost-efficient. They require cryptocurrencies to make the peer-to-peer transaction by a program, which is obviously possible only with a digital currency.
Hence, makes Smart contracts a digital use case of cryptocurrency.
NFTs
Non-fungible tokens are raging right now, NFT market has tripled since last year with its gain in popularity among creators.
NFTs are digital assets that can be sold, bought, or auctioned online using cryptocurrencies.
The following stories will help you understand the potential of NFT markets.
“Bitcoin is a technological tour de force.” — Bill Gates [Source: FoxBusiness]
