Crypto Currency Crashed

  

Crypto Currency Crashed

The cryptocurrency market has witnessed a major crash this week, which saw the value of Bitcoin fall from its record high. According to traders, the bitcoin price started on Monday and was able to rise up to $29,895 by Friday after closing at nearly $35,000. There were rumors that it may reach as high as $40,000 in some time. It is important to note that only a few hours earlier there was another massive drop of more than 50 percent.

The decline in bitcoin can be explained with two main factors that included low demand for bitcoin and government regulation regarding cryptocurrencies. However, experts believe that the decrease in popularity of traditional currencies such as euros and dollars affected the trend.

Cryptocurrencies have been a significant part of the mainstream world economy and people in many parts of the globe are using them to send money. Even though most of these countries have already banned Bitcoin or other cryptos, others still allow mining, trading and storage of coins. As a result, the BTC market became flooded with coins. This led to an increase in prices. Many investors believed that they were losing big when the value of BTC came down.

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In the past weeks, several altcoins and tokens were bought by institutional investors during the bull run. For example, DOG token, based on Ethereum, raised $20 million during the month of December and ETHDAO raised over 5 million USD, as well as ZARPA, also a crypto token with 3 million USD worth. Thus, it appears that the retail investor is becoming more conservative by the day. Most investors are now shifting towards long-term investment. While the value of Bitcoins grew more than 4,6 times, the valuation of stablecoins, like DAI, XMR, TUSD and BUSD, dropped by over 13 times.Due to the decreasing number of buyers on the digital coin exchanges, the supply of bitcoin, ether and Litecoin also decreased. Furthermore, due to limited activity on crypto markets, users were forced to spend more on services like Coinbase, EToro and Gemini due to higher fees. Consequently, the cost of buying Bitcoin, Ether, Litecoin and the other top cryptos are rising. These coins have not yet paid their owners’ income, thus, the sellers do not receive any money. Due to this reason and fear of being hacked, many people, including regulators, are trying to limit the use of cryptocurrencies.

As per researchers at Harvard’s HBS unit, who studied how the market works, “…the new wave of ‘decentralization’ is here, but it’ll take years to become ingrained… It’ll just take you back to the old school of centralized banking — except that it won’t hurt your bank account.” Another study by the US Federal Reserve Bank of New York revealed that central banks can no longer control the global monetary policy because all other institutions are getting out of the game. Governments will no longer try to influence the amount of money printing, interest rates and interest rates on borrowing.

However, while the financial industry has started slowly moving into the next phase, traditional currency stores are failing to respond quickly enough to the changes. In fact, their performance is worse compared to the previous months. 

The reasons for their poor performance include limited availability of alternatives such as credit cards, debit cards, wallets, online remittance services, etc., which make it extremely difficult for consumers to keep up with the pace of growth. Further, the lack of regulatory support is another issue that needs to be considered. All the large payment platforms, including PayPal, Google Pay, Amazon Go and Apple Pay, have not implemented any regulatory framework. This means that even though they offer fiat currency features, the user cannot store the money anywhere else apart from their own wallet. This makes it easier for hackers and scammers to gain access to personal information from customers and transfer funds without customer knowledge.

The recent events had made everybody cautious about their monetary positions. Now, if anything, it could encourage more people to go for alternative investments instead of keeping their money in a bank. Moreover, many companies are considering introducing innovative solutions for handling payments. For example, MetaBank is reportedly going to launch Naira, a payment solution built using blockchain. Additionally, PayPal will implement NFC and Near Field Communication, for the first time, in order to improve payments through smartphones, making sure that the cardholders get their money instantly. A growing list of cryptocurrencies companies is expected to expand their portfolio to include decentralized finance.