At the time of shooting this video, Bitcoin has fallen in value by over 70% since its year high on 10th November 2021 at $68,990.
This morning BItcoin is down already 10.4% from just yesterday at $20,229. Bitcoin fell 15.63% on Monday, 1.29% on Tuesday and 10.4% today. Ethereum, another cryptocoin, is down over 14% today as well as many others being c10% down.
Why has Bitcoin crashed?
Firstly, we have to understand what Bitcoin is:
- Decentralised digital currency i.e., it is cross border, operating worldwide with no central bank or government supporting it.
- Bitcoin is a unique, encypted code with a key to unlock it. As each coin is totally unique, its value is that it is unique, cannot be replicated and enables secure messages and transactions to take place.
- Bitcoin is stored in a public ledger (the Blockchain) meaning it is accessible provided you have the key to unlock. By being on a public ledger, it means you have access to it if you have the encyption key to unlock it.
- Blockchain is a shared, unchangeable ledger that allows the process of recording transactions and tracking assets. These assets can be intangible i.e., you cannot touch them such as insurance, intellectual property, patents etc or a secure ledger record of physical, tangible assets such as buying land, your home and your car.
- The monetary value in a Bitcoin is that it is a totally unique, enrypted code with a key which is extreme;y useful for the security of transactions. It will become ever more useful for secure transactions and ownership over the coming years. Very soon we see things like mortgages and property transfers becoming quicker as the security of blockchain technology will make it faster and more secure.
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So why the crash? Its strength is also its weakness.
- Each one is unique and secure in the blockchain ‘metaverse’ meaning it is not controlled by one central bank or country. It cannot be copied.
- Given it is on a public ledger, if you lose your ‘wallet’ i.e. lose your key, it is gone. No chance to recover it. Whoever holds the key, owns the ‘coin’. If you lose it, it is unique and cannot be replaced.
- It is unregulated in most parts of the world meaning you have no regulatory protection.
- It is not backed by the assets of a country or central bank unlike currencies such as £, $ and €. This means it has no security.
- There is no investor protection should it fail.
We are in a period of high inflation, recession is looming, interest rates are rising and the cost of living is getting worse as inflation is out pacing wage increases meaning we are becoming poorer. People are looking for safety and security and cryptocurrency does not offer the same security as say that physical bar of gold or currencies backed by central banks. Fears for the global economy have pushed people away from high risk, unsecured investments such as Bitcoin.
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