Lost 75% of its value in the last year.
Are virtual currencies the future or a platform for fraud? (Photo: ShutterStock)
In the last year, the value of Bitcoin has fallen by about 75%, and we have witnessed a significant collapse (including revelations of fraud, etc.) in the broader crypto ecosystem.
Many ask themselves what the events of the last year say about Bitcoin?
The skeptics claim that the recent events only show that from the beginning Bitcoin was created as a tool for speculation, and perhaps even as a fraud.
Bitcoin's supporters try to distinguish it from the dramatic events in the broader crypto ecosystem, and claim that for them nothing fundamental has changed - and that Bitcoin's end will come.
So what is the future of Bitcoin?
People tend to look for easy, black-and-white answers.
However, the reality is more complex, and it is difficult to estimate where exactly the events will lead.
What's more, in order to put things in order, there are some central questions that can be answered right now:
Was Bitcoin created to be used as a tool for speculative activity?
Behind the creation of Bitcoin stands a clear ideology, political and technological, that developed among groups of computer scientists and Internet activists in the twenty years preceding its launch in 2008/2009.
That is, it was not created to make profits, but to promote a certain political-technological agenda.
Was it used as a tool for speculation?
But so are many tech stocks.
This bubble is fueled by the cheap money of recent years, and in a special way by the great liquidity created by the countries in the markets as a response to the Corona crisis - see in parallel the graphs of the change in percentages (compared to the previous year) in the amount of money in the US and in the price of Bitcoin. It is easy to recognize the connection between the graphs. Not surprising Because a speculative bubble was created in 2020-2021.
Is it possible to extrapolate from the bursting of the speculative bubble that developed in the crypto world (including bitcoin) to the question of justifying the existence of bitcoin?
What is it similar to?
To state in 2001 that the bursting of the speculative bubble in Internet stocks ("the dot-com bubble") of 1999-2000 showed that there was no justification for the Internet.
Bitcoin may not have a real raison d'être - but that is a separate discussion.
The bursting of the bubble does not prove this, there is no logical connection between the two things.
Eran Peleg, Chief Investment Manager at Clarity Capital (Photo: Eric Sultan)
The new gold?
to conclude the question of the questions: So where does this leave us?
It is too early to know what the future holds for Bitcoin.
It is interesting that despite the catastrophic events of the last year in the crypto world, the price of Bitcoin is far from a complete collapse - it is trading around $16,000, a fairly substantial amount, and in total has returned to its level from the end of 2020, before that rapid, speculative jump in its price.
Also, the basic questions regarding him remain largely open: Can he have a role in the global financial system?
(In my opinion, if so, then a niche role only) Does it require regulation?
(In my opinion, yes, in some aspects - although this contradicts the ideology that underlies it) Should something be done about the energy wastefulness that characterizes it?
(In my opinion, yes - see the recent positive steps taken in Ethereum), will it be able to be used as money?
(In the full sense of 'money', in my opinion, most likely not) If not as money, maybe only as a financial asset, somewhat similar to gold?
(In my opinion, it is possible).