Although Bitcoin shares amounted to 60 thousand dollars

Cryptocurrencies are going into oblivion

  • Bitcoin is the most popular cryptocurrency.

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  • Cryptocurrency reached its peak of popularity last year when an advertisement for American actor Matt Damon was published.

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Recent events have made clear the need for regulation of cryptocurrency, an industry that grew from nothing to a market cap of $3 trillion a year ago, although most of that has now evaporated, but it seems likely that the industry will not tolerate regulation. .

The story so far is that cryptocurrency reached the peak of its popularity and fame last year, when an advertisement by American actor, Matt Damon, entitled “Fortune Favors the Brave” was published, sponsored by a Singapore-based stock company.

At the time, Bitcoin was the most popular cryptocurrency, with a share price of about $60,000.

Bitcoin is now selling for less than $17,000 a share, so all those who bought Bitcoin shares after seeing Damon's ad lost about 70% of their investment.

In fact, given that most people who bought bitcoin did so when the share price was high, most cryptocurrency investors have been losing so far, according to new analysis from the Bank for International Settlements.

Asset prices go down

However, asset prices in general have fallen all the time. People who bought shares in Meta, which was known as Facebook, at the height of its market activity, also lost as much as investors lost in Bitcoin.

Accordingly, falling prices do not necessarily mean that cryptocurrencies are doomed to failure, and those working in the field of this currency certainly will not give up.

According to a report by The Washington Post, many of those who signed up for Twitter (with verified accounts) were promoting right-wing politics, porn, and cryptocurrency speculation.

The collapse of companies operating in cryptocurrency was a clear indication of the price drop, the most recent of which was the FTX Corporation, one of the largest companies selling crypto shares, which declared bankruptcy, as it appears that the people who run this company have stolen the depositors’ money, which amounts to about Billions of dollars, and they may have used that money in failed efforts to support FTX's sister company, Media Research.

The question that should be asked: Why are companies such as FTX or Terra, which are known to issue cryptocurrency, and which collapsed last May, being created in the first place?

The beginning of cryptocurrency

In the beginning, in 2008, the white paper that started the cryptocurrency movement was published, under the pseudonym "Satoshi Nakamoto", which was titled "Bitcoin... a peer-to-peer electronic cash system", meaning that the whole idea, i.e. the electronic tokens that Deriving its legitimacy from the technologies derived from cryptography, it will be possible for people to bypass financial institutions.

And if you want to send money to another person, you can simply send him a number, as a key, without having to trust financial institutions such as “Citigroup” or “Standard”, and register the transmission with one of them.

It was not clear exactly why anyone, other than criminals, would want to do this.

Although cryptocurrency advocates often cite the 2008 financial crisis as a catalyst for their work, it did not disrupt the financial payments system, i.e. the ability of people to send money through banks.

Nevertheless, the idea of ​​a monetary system that does not require trust in financial institutions sounds interesting, and is worth a try.

You haven't made any progress

But after 14 years, the cryptocurrency has not made any progress towards competing with the traditional role of the traditional currency used on a daily basis, and it is difficult to use it in ordinary financial transactions, and its value is completely unstable.

In fact, few investors risk keeping their encrypted keys themselves, as it is dangerous to keep them in a CD, which may end up in the trash, and that is why cryptocurrency is largely bought from institutions of stock companies such as Coinbase and, of course, FX. tx, which takes your money and puts encrypted tokens in your name.

These companies that sell shares are financial institutions, whose ability to attract investors depends on investors' confidence in them.

In other words, the encryption system has basically evolved into what was supposed to replace this encryption, which is the system of financial intermediaries whose ability to operate depends on how much confidence investors see in them.

What is the goal?

In this case, what is the point of the encryption industry?

Why does this industry hold value in the first place?

Because it is considered at best a reinvention of a traditional banking system.

In addition, trust in traditional financial institutions lies in part in verifying their credibility, which is done by the United States, which supervises banks, works to regulate the risks that can occur, and guarantees many deposits, while the cryptocurrency works without Largely controlled.

Accordingly, investors should rely on companies that are credible and honest, along with efficiency, and when these companies offer exceptionally great deals, investors must believe not only in their competence, but in their genius as well.

Promises of impossible returns

As supporters of this currency always like to remind us, previous predictions about the imminent end of the cryptocurrency have been proven wrong, and in fact, not using Bitcoin and its competitors as a currency in circulation among people does not necessarily mean that it has become useless, the same applies to gold.

But if the government eventually moves to regulate cryptocurrency companies, which will, among other things, prevent them from promising impossible returns to investors, then we will find it hard to see any other advantage these companies have over traditional banks. .

Even if the value of Bitcoin does not reach zero (which is still to be expected), there is a strong case that the cryptocurrency industry, which seemed like something so big and important a few months ago, is now heading into oblivion.

Paul Krugman is a columnist for The New York Times.

Supporters of this coin always like to remind us that previous predictions about the imminent end of cryptocurrency have been proven wrong.

In fact, the non-use of Bitcoin and its competitors as a currency circulated among people does not necessarily mean that it has become useless, the same applies to gold.

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