Is the Crypto Bubble About to Burst?

Cryptocurrencies are volatile and have always been

Even if Bitcoin and other cryptocurrency are not your main concern, you may have noticed that the market’s value plunged from $3 trillion last year, to just $1.5 trillion, in a matter days. Bitcoin, the most well-known and most valuable cryptocurrency, saw its value drop from $69,000 down to $33,000. This means that if you’ve recently invested in Bitcoin, or any other cryptocurrency, you may have taken what experts call “a shower.”

This is not unusual. This is not unusual. Cryptocurrencies have always been volatile. There have been two huge drops in Bitcoin’s price within the last twelve months. This is one of the reasons crypto enthusiasts keep telling each other to “HODL” (hold on for dearlife). These dips are not unusual and the value always recovers to its original levels.

With the recent volatility, however many are questioning crypto’s fundamentals, particularly the claim that it’s an excellent “safe harbor” hedge investment like Gold. But safe harbors should be immune to inflation and market volatility. The value of gold is steady, even though other markets do flips, is why goldbugs love it. Bitcoin, and all the other 17,000 cryptocurrencies, isn’t the same.

From where does crypto’s value originate?

It’s difficult to understand cryptocurrency because it is just computer code. The blockchain is the basis of every cryptocurrency. It’s a clever piece code that records transactions in a secure and public way. This makes it almost impossible to alter the transaction records, and also provides anonymity.

The primary reason cryptocurrency has value is because people claim it does. Most people with large crypto positions aren’t objective so they don’t always have a fair view. While Bitcoin is the largest cryptocurrency in the world, it’s still extremely difficult to buy any goods or services using it. Additionally, its volatility makes it very difficult to use it as a currency. It’s also very volatile and difficult for anyone to predict what the fees will be around crypto transactions. This makes it an exciting, but often expensive, adventure.

There’s also the climate effect. Bitcoin is intended to be in limited supply. The process of “mining” new bitcoins involves solving complicated equations. It took only a computer at home to create new bitcoins in 2008. As more coins become available, it becomes more difficult to mine them. In fact Bitcoin consumes more electricity now than small countries. The power demands of Bitcoin are expected to rise. This is not a good way to produce anything. The financial and climate impacts are becoming more concerning. It also undermines the faith in cryptocurrencies in the future. El Salvador, the country that uses Bitcoin as its legal tender, was not surprised to consider building a mining facility on top of a volcano.

Finally, many countries are poised for a slap on crypto’s face. Russia’s central banking is likely to ban crypto. China already has. The Federal Reserve of the U.S. seems ready to get in on the action with its own cryptocurrency. However, experts disagree about whether this will bolster the market or eliminate it completely. Crypto’s association is almost certain to be a part of criminality, both in terms of rising scams that lure naive investors to doom, and because of its popularity with criminal groups who love the anonymity.

Are you a crypto investor?

Crypto appears to be a giant bubble that’s bound to burst, so it is important to consider crypto gambling as an investment. While you are taking a chance with stocks, there is some real and definable information that can help you make decisions. Although you may get the price for concentrated orange juice futures wrong, your investments will still be protected. It’s impossible to predict what crypto will bring. zero information is available. Bitcoin could rise to $100,000 tomorrow, or fall to $10,000. Nobody knows. Worse, there is no way for anyone to know.

It is important to avoid investing in crypto that you can’t afford. Mark Cuban is a billionaire who was also the star of Shark Tank. He is a person who constantly tells people how they can be successful in finance and business. However, he lost $200,000 trying to “yield-farm,” a type of crypto investing where you purchase crypto “tokens and loan them back to the platform to gain interest. According to the New York Times he said that he should have done more research.