Why The Fate of Cryptocurrency Remains Susceptible
To buy, or not to buy, that is the question.
As the new year unfolds, the fate of cryptocurrency market remains a constant battle for investors what lies ahead. The strong gains and the fall during the past year have raised a lot of questions how digital currencies will behave in the coming future.
With each passing day more and more people are interested to learn about cryptocurrencies and how they work. The mainstream media is eager to write something new about virtual currency and even some financial advisors share those things as well. Due to rising demand particularly in Asia, the price of cryptocurrencies have skyrocketed. However, the recent cryptocurrency crash especially when bitcoin’s price plunged reiterates how volatile the cryptocurrency market is.
Let’s narrow down the popular cryptocurrency Bitcoin. It is not hard money and only remains present in the digital world. Its payment system is very complex and the value remains volatile. The transaction takes place between individuals without a third party. Bitcoins are usually identified with an anonymous address that comprises 26-35 alphanumeric characters beginning with either “1” or “3”. This address, determines the destination of a Bitcoin, or its fraction. Its monetary system is not guaranteed by government. It’s pure simple and digital money. Bitcoin can also be mined through high-end computers and once the transaction is complete, they are rewarded with new Bitcoins. However, people who have had mined bitcoins lost billions by losing private key.
David Glance who is a practice director at the University of Western Australia’s Centre for Software said Bitcoin’s original design, was limited in its way of processing transactions and putting them on its blockchain. Developers enforced these restrictions towards security over functionality that was not a problem in Bitcoin’s early stages as the digital currency was not popular among people. However, the split group of developers and followers, later on, had diverse views on the possibilities of lifting the restrictions. Ultimately Bitcoin’s core developers projected to create more space in the ledger and then explored the ways to increase the size of the “blocks” or groups of transactions added to the blockchain.
According to a new research by digital forensics firm Chainalysis, nearly 4 million bitcoins could be lost forever, out of the total 16.7 million bitcoins in circulation. The study was based on a thorough empirical analysis of the blockchain — the “digital ledger” which keeps track of all transactions, and which gives the currency its value. Another study by Fortune has concluded that between 2.78 million and 3.79 million bitcoins — 17 to 23 percent of existing supply — are lost, that amounts to more than $US30 billion.
There are over 900 different crypto coins available on the market today. Some coins are present with esoteric names like PonziCoin, MarxCoin, SelfieCoin, and PutinCoin, with more coins developing all the time. That is why fears about the cryptocurrency bubble continue to spread. Some experts have even described cryptocurrencies as “worse than the IT bubble” of the late ’90s.
Laws and Regulations
Many countries have banned the use of bitcoin and other digital currencies outrightly. They have shown a negative attitude towards cryptocurrencies as their respective banks have issued official statements prohibiting bitcoin transactions citing untraceable nature, lack of payment system and criminal activities like terrorism or the drug trade as basic reasons. Morocco and Vietnam have recently outlaw bitcoin transactions. Bangladesh, Bolivia, Ecuador and Kyrgyzstan had already banned the use of digital currencies. China has also prohibited Initial Coin Offerings and bitcoin trading and exchange sites. And many other countries are still deliberating how to regulate cryptocurrencies such as India where Reserve Bank of India has deliberated about cryptocurrencies through various statements. In short, lack of regulation is considered to be the Bitcoin’s biggest disadvantage and severely affects its acceptance by people. Lack of regulation is a double-edged sword for bitcoin.