The price of the representative virtual currency (or cryptocurrency) Bitcoin, which once rose to $64,000 in April, has recently fluctuated between $40,000 and $50,000. The Bitcoin price, which fell to the $29,000 level on July 29th due to the US' tapering (reducing liquidity supply) movement in response to regulations from around the world, such as China's total ban on cryptocurrency mining, is the same as PayPal. The UK also announced that it would launch a cryptocurrency trading service, and it rebounded as Coinbase, a cryptocurrency trading platform, announced a plan to buy 500 million dollars.
However, the price of Bitcoin continues to fluctuate. The movement to regulate virtual currency in each country continues, and after China, countries around the world, such as the United States and Korea, are promoting the central bank digital currency CBDC (Central Bank Digital Currency) led by central banks in earnest. It threatens the position of virtual currency or cryptocurrency. In early August, the Poly Network, a cryptocurrency trading platform, was hacked and the $600 million worth of cryptocurrency it had was stolen and returned. is being raised
The rising volatility in the asset market is also heightening uncertainty over cryptocurrency prices as the US announces that it will start tapering to reduce the amount of bond purchases from the fourth quarter of this year by $120 billion a month.
According to CoinMarketCap, which provides information on the global virtual currency market, as of August 29, 11,456 types of virtual currencies were listed on 397 exchanges around the world, with a market cap of $2 trillion, and daily trading volume. is over $100 billion.
Considering that there were 6,000 types of virtual currency worldwide and a market cap of $330 billion a year ago, the number of types of virtual currency has doubled and the market cap has doubled over the past year.
The number of digital wallets holding virtual currency has tripled to 100 million in 2018, three years ago.
The British economist predicted on the 7th that if the virtual currency market collapses based on the hypothetical scenario of 'what if the bitcoin price goes to zero?', the traditional financial market will also have a significant impact.
In particular, it is predicted that the impact will not be formidable as the relationship between the virtual currency market and the existing financial market has grown, with the proportion of virtual currency trading by institutional investors, including hedge funds, rising from 10% in 2017 to 63% in 2017.
'If $2 trillion in virtual currency becomes $0'... Cryptocurrency last day
Scenario Economist divided the factors that can trigger the cryptocurrency crash into internal and external factors within the cryptocurrency ecosystem. And as an internal factor, he cited a technical defect in the system that operates the virtual currency or a hacking of a large virtual currency exchange. As an external factor, he suggested a situation in which the market suddenly stopped due to strict regulation by the regulatory authorities or an interest rate increase by the central bank. .
Mohamed El-Erian, Allianz Economic Advisor, is a strategic advisor to crypto investors: 1) Fundamentalists who believe that cryptocurrencies will eventually replace government-generated fiat currencies, and 2) Strategic beliefs that prices will rise as more people participate. Investors (Tactician) 3) were classified as speculators who want to gamble. While it appears that cryptocurrency fundamentalists will not leave the cryptocurrency market even if the price plummets, a second strategic investor will not stay in the market if the price plummets, and a third speculator will leave the cryptocurrency market even if there are signs of trouble. .
The Economist predicted that if the price plummeted, there would be less incentive for bitcoin miners who authenticated transactions and received new coins to mine. . If the price of Bitcoin collapses, it is predicted that the price of other cryptocurrencies will also collapse.
If the cryptocurrency market, which has a market cap of $2 trillion, collapses, first of all, significant direct losses for those who hold cryptocurrency will be inevitable. Considering that the price of Bitcoin, which stayed in the $10,000 range, has surged since October last year, it is likely that the losses for those who entered the cryptocurrency market from the fourth quarter of last year will be particularly large. The losers will include hedge funds, university endowment funds, mutual funds, and many companies, the economist observes.
The drop in the price of virtual currency will also hurt virtual currency companies, virtual currency exchanges, virtual currency trading service companies such as Paybal, and companies that produce semiconductor chips for coin miners such as Nvidia. This is why there are speculations that if the cryptocurrency market collapses, an economic blow much larger than the market capitalization of virtual currencies of $2 trillion is inevitable.
In addition, secondary damage such as virtual currency-related derivatives and virtual currency-related loans is expected to be inevitable. The Economist has diagnosed that stablecoins such as Tether, which are used as an auxiliary tool in cryptocurrency trading, could be the trigger for another financial crisis.
Stablecoins, which are estimated to have an issuance of US$100 billion, are cryptocurrencies linked to the value of US dollars or euros, and are used to trade other cryptocurrencies.
Stablecoins are always said to be convertible into dollars or euros, but in the case of Tether with an issuance of more than $62 billion, as of March, only 5% of Tether was held in dollar cash or government bonds, and the rest were commercial papers or high-yielding bonds. The economist reported that they are investing in corporate bonds and commodity products.
If there is a problem in the virtual currency market and withdrawal requests are made all at once, there are concerns that the stablecoin company may sell its assets, causing the asset price to plummet and further insolvency.
Mining algorithm similar to 'Wolnamppong'... Is Bitcoin Mining a 'Computer Game'?
If so, what will be the value of the virtual currency or cryptocurrency represented by Bitcoin in the future? Jacob Goldstein, in his book 'Money', a book about the history of money, said that the value of bitcoin ultimately depends on people's 'willingness to pay' and how the price of bitcoin rose to $60,000. is explaining
Jacob Goldstein says that the starting point of cryptocurrency is Digital Cash, which was invented by American computer scientist David Chaum in the 1980s. Chaum's digital cash developed into a cryptocurrency by cyberpunks who wanted to be free from interference from central banks and governments in line with the development of the Internet in the 1990s. Satoshi Nakamoto (pseudonym; real name Dr. Craig S. Wright) completes in his paper 'Electronic cash without a trusted third party'. The title of this paper was changed to 'Bitcoin: A peer to peer electronic cash system', where the cryptocurrency called 'Bitcoin' appeared.
On January 3, 2009, when the global financial market was faltering due to the bankruptcy of Lehman Brothers in the United States, Satoshi Nakamoto created the 'Genesis Block' of Bitcoin 0. Genesis with the headline and hexadecimal number of the top article in the British daily The Times, 3 January 2009, "Chancellor on brink of second bailout for banks" Block is the source of Bitcoin and is a template for creating Bitcoin. Satoshi created the first block chain 6 days after the creation of the Genesis block. Cryptocurrency
Bitcoin is a unique 64-digit hexadecimal number encrypted by a specific function. As a numbered block, a Bitcoin block is a ledger that records previous transactions of the Bitcoin block.Bitcoins can be bought through cryptocurrency exchanges or obtained through 'mining' using a computer.
In order to participate in mining, you must first download the program and help with bitcoin transactions, and if the amount of work contributed by participating in bitcoin transactions exceeds 1 megabyte, you will be eligible to solve the problems presented by the bitcoin network. According to (Investopia), the problem that the Bitcoin network presents every 10 minutes is not an equation that requires complex calculations, but a random number with 64 hexadecimal digits.
A person participating in Bitcoin mining must guess and guess the target hash that the Bitcoin network has in mind. Miners who present a number larger than the correct answer are eliminated, and either correctly match a specific value or select the closest number. The presenter gets bitcoins. So-called 'Vietnam Pong', where you receive two cards numbered from 1 to 12 first, and then you lose if the number of the third card is outside the number of the first two cards, and if the number is equal to or between the first two cards, you receive the wagered money. It's the same game.
According to Investopia, the correct answer to the problem presented by the Bitcoin network is a 64-digit hexadecimal number, and the probability of correcting this number is 1 in 17.59 trillion, which is the same as the probability of getting the same number by tossing a 16-sided dice 64 times. Not everyone gets bitcoins if they get the correct answer given by the Bitcoin network. If there are multiple participants who answered correctly or provided the most approximate number, the Bitcoin Network will give Bitcoin to the person who has contributed the most to the operation of the Bitcoin system through comparative evaluation.
The reward given to those who succeeded in 'mining' by correcting the problems presented by the Bitcoin network was 50 when Bitcoin was first created in 2009, but will be reduced to 25 in 2013, 12.5 in 2017, and 6.25 in 2020. It was. It is designed to halve the Bitcoin reward given every 10 minutes when a new block is formed by successful mining every 4 years. In addition, the difficulty of the mining system is adjusted every 2 weeks or 2,106 blocks are newly created so that mining is successful only once every 10 minutes.
As the size of bitcoin issuance decreases and the number of people who want to mine increases, the difficulty of bitcoin mining sharply rises. Now, the possibility of successful mining with a personal computer has virtually disappeared, and several people have formed a fund and must use a special chip such as a graphics processing processor (GPU) or ASIC (Application Specific Integrated circuits) along with a high-performance computer to succeed in mining. will be.
Bitcoin mining is called a 'computational arms race', so success depends on who can mobilize a higher-performance computer.
Now, the success or failure of mining, which requires thousands of trillions of calculations to be successful, depends on who can purchase a high-performance computer at a lower price and how much lower the electricity bill.
It is also evaluated that Bitcoin mining is virtually uneconomical due to the huge computer hardware purchase cost and power consumption.
This means that the economic feasibility of mining can be secured only when the price of Bitcoin rises to the ceiling or the number of miners decreases, which increases the probability of successful mining.
As of August 29, the number of bitcoins issued so far is 18.8 million.
The creator of Bitcoin, Satoshi Nagamoto, set the maximum Bitcoin issuance to 21 million.
The size of new bitcoin issuance is halved every four years, and there will be no new bitcoin issuances in 2140.
From 0.3 cents to $60,000... How did Bitcoin become a 'blockbuster'?
According to Jacob Goldstein's book 'Money', in 2010, a year after the advent of bitcoin, Gavin Andresen, a bitcoin advocate and program developer, called 'bitcoin faucet'. He created an internet site called 'Bitcoin' and gave 5 free bitcoins to anyone who visited the site or created a bitcoin account.
Around the same time, Laszlo Hanyecz of Jacksonville, Florida, USA, posted on a Bitcoin site that he would give 10,000 bitcoins to anyone who sends them two pizzas. Two days later, a 19-year-old Californian who saw this contacted Laszlo through an internet chat and received 10,000 bitcoins. In return, he ordered two pizzas from Papa John's in Jacksonville and sent them to Laszlo. At this time, the price of two pizzas was $30, and the price of the first bitcoin traded was only a third of a cent.
In February 2011, Dread Pirate Roberts created Silk Road, a dark internet site that illegally trades cannabis, drugs, poppies, ecstasy, etc. did. After that, the demand for bitcoin started to increase significantly, and the price of bitcoin, which was traded at $1 a piece in early 2011, soared to $30 when the website Gawker introduced Silk Road in June of that year. In 2013, the FBI arrested Ross Ulbricht (real name of Dread Roberts, who created the Silk Road), who was sentenced to life in prison for drug trafficking and illegal money laundering. (Tucson) serving a sentence.
Despite the negative view that an anonymous electronic certificate is used for illegal transactions, Bitcoin has continuously grown as a distributed processing system called blockchain, which does not require a centralized device and is evaluated as a new technology with excellent security and stability. During the 2008 financial crisis, governments around the world, including the United States, issued astronomical amounts of money, and distrust of fiat currency was rising. .
In 2020, the U.S. will again supply an astronomical amount of dollars in the aftermath of the Corona 19, and Elon Musk, the founder of Tesla, an American electric car company, announced that he would use bitcoin as a payment method, and institutional investors also jumped into bitcoin trading. Once again, the price skyrocketed. As the price of Bitcoin skyrocketed, the price of other cryptocurrencies such as Ethereum and Dogecoin also rose, and new cryptocurrencies emerged like crazy.
Cryptocurrency advocates argue that the value of Bitcoin, which is limited to 21 million issuance, will increase and become a future payment method that will replace fiat money, unlike the rapid increase in the issuance of fiat currency. It is also predicted that the blockchain system used by virtual currency will become a central platform on which the emerging metaverse world operates.
However, Bitcoin, whose price fluctuates rapidly, is evaluated as lacking the stability of value that money should have as a measure of value, storage of value, and means of exchange. Unlike Bitcoin, other cryptocurrencies such as Ethereum do not have restrictions on the issuance volume. Unlike fiat currencies, where the central bank guarantees payment as a 'lender of last resort', virtual currency does not have a final lender guaranteeing its value. The fact that the Bitcoin system using the block chain method can only process 5 transactions per second is also pointed out as an obstacle to its function as a currency.
"The cryptocurrency market is full of lies and fraud," said Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), at Congress on August 3rd. "It's like the wilderness of the 19th century." In the mid-1800s, when there was no central bank, anyone could establish a bank and issue money with only a certain amount of collateral.
Humanity, who used to trade using real currencies such as gold, silver, and copper, was able to achieve breakthrough economic development by issuing banknotes as deeds for real things and using them for transactions. However, due to the lack of real money such as gold as collateral, the issuance could not be increased in time to keep pace with economic growth, and deflation was repeated. Accordingly, the gold standard system in the United States was abolished by President Nixon in 1971, but there was no crisis of trust following the abolition of the gold standard.
Jacob Goldstein writes in his book 'Money' that the value of bitcoin ultimately depends on the thoughts of its users. If trust in Bitcoin with the anonymity of cash and the convenience of digital currency is maintained, the price of Bitcoin will be maintained, but if trust is broken, the value of Bitcoin may also disappear.
The famous American economist Irving Fisher is famous for his emphasis on the real value of money and for varying the salaries of his employees according to price movements. When inflation rises, wages rise, and when inflation falls, pay decreases. In the process, he discovered that, even when prices rise, employees like it when they raise their salaries, but dislike them when prices go down. Fisher described this phenomenon as 'Money Illusion', a phenomenon in which people like money as long as the nominal amount of money is increased even if the real value does not change.
Fisher's 'misunderstanding about money' means that when the price of an asset such as real estate, stock, or coin rises, everyone likes it, but the truth is that the value of money decreases by that much. And the change in the value of that money has a huge impact on the real wealth of economic agents such as depositors and borrowers, asset holders and cash holders. One of the important factors that will determine the price of virtual currency in the future is the issue of trust in fiat currency, which is how much the central bank, which is releasing money to overcome the economic crisis, can maintain trust in the value of fiat currency. also be