The hype of the Bitcoin revolution
Bitcoin cryptocurrencies generate expectation, and its current revolution is undeniable. For many investors it is their day-to-day business, and for others it is a risk that they are not willing to take. In this article we put the matter in question under the microscope.
Bitcoin is a type of digital currency or means of value exchange based on a decentralized disruptive technology, up until now there is no authority or entity that regulates it, so its issuance or exchange cannot be controlled. This currency is technically supported by the Blockchain and linked to a virtual wallet, from which transactions are deducted or added, it is even available to download for free.
Let’s analyze… Since Bitcoin currencies are not generated by a central bank or endorsed by a government as such, aspects as inflation rates, regular monetary policies and traditional economic growth indicators do not affect the currency at all. The global economic world may be falling apart and Bitcoin may still be intact. On the other hand, the Blockchain makes Bitcoin transactions reliable and secure since the information on each exchange is public and not owned by anyone. In addition, the codes that identify the wallets for the Bitcoin cryptocurrency are unique and extremely difficult to forge, considering that these are long numbers created randomly. This may sound very “nice” but not without some dangers involved.
What is the danger?…
Some dangers are: just as there is illicit handling of ordinary money and Bitcoin is no exception. On the one hand, there is the type of illegal pyramid-type money raising. On the other hand since Bitcoins are handled internationally without regulation, they can present high volatility, for example the central bank of China warned that in a single day the Bitcoin currency depreciated 15%. For the same reason, the Superfinanciera adds that since this currency is not backed by a physical asset, the exchange with real money can easily reach 0.
In Colombia it is not considered a legal means of payment yet, which is a great risk for investors. Due to the lack of control by government and financial entities and considering that it is marketed in different countries, the lack of regulation is also dangerous. Taking into account the anonymity in the transactions, it is difficult to detect illicit activities, such as theft of wallets and fraud.
However, in February 2021, Elon Musk announced through a tweet an abysmal purchase of Bitcoin and that he was planning to accept the cryptocurrency as a form of payment, for which its value was catapulted through the air. After his actions and the announcement, he confirmed that he would not receive Bitcoin as payment for his products, these news were so polemic that Bitcoin fell 15% that day, causing commotion. This case demonstrates the volatility of Bitcoin and it is seen by many as a bubble that can burst any time. What we can say is that the subject, by being commented by a character as influential as tycoon Elon Musk, shows importance and potential.
Along the same line, as early as 2014 Bill Gates himself already expressed his excitement about cryptocurrencies in an interview on Bloomberg, he said “Bitcoin is exciting because it shows how cheap it can be. Bitcoin is better than a normal currency in the sense that you don’t have to be physically in the same place and obviously for large transactions, physical money can be a big inconvenience.” He is said to be one of the biggest investors in Bitcoin in the world, despite of the lack of knowledge on how much his capital actually is.
Bitcoin has a history of more than a decade of creation, but it has shown relevance publicly not long ago. The hype shows love as well as hate, it should be said that Bitcoin has certainly increased its value over time. But only time will tell if this system continues or if it is permanently dismantled.