Bitcoin Winter Gets Icier Just Days Into New Year

By the middle of June 2022, the value of bitcoin had dropped to USD 17,000 from USD 69,000 in November 2021. Bitcoin supporters interpret the apparent stabilization as a respite from the upward trajectory. However, it is more likely to be an artificially induced last hurrah before becoming irrelevant, which was already foreseeable before FTX went bankrupt and sent the price of bitcoin well below $16,000.

Bitcoin Market Transactions

It is rare to use Bitcoin for legal transactions. The idea was published under the pseudonym Satoshi Nakamoto in 2008. Bitcoin has been promoted ever since as a global decentralized digital currency. Bitcoin has never been widely used for legitimate real-world transactions. In the middle of the 2010s, the narrative began to be dominated by the hope that Bitcoin's value would unavoidably rise to ever greater heights. However, Bitcoin is also inappropriate for investment.

Bitcoin Market Value

As per fxmag, Bitcoin's market value is entirely based on speculation. New money is needed to create speculative bubbles. Waves of new investors have also benefited Bitcoin repeatedly. the manipulations carried out by specific exchanges, stablecoin providers, and others. The stabilizing factors after the alleged spring bubble bursting are less well-documented than those during the first waves.

Bitcoin Market Investors

The greatest incentive to maintain the euphoria is provided by large Bitcoin investors. At the end of 2020, isolated businesses started promoting Bitcoin at the expense of their businesses. Large investors also provide funding for lobbyists who advocate on behalf of their clients before legislators and regulators. Sometimes, their names appear to be on a list of all US regulators. However, for lobbying to have an impact, a sounding board is required.

Markets in Crypto-Assets Regulation (MICA)

Regulators, on the other hand, do not dispute the dangers of crypto assets. However, in recent years, ratification of crypto-assets legislation has sometimes been sluggish, and implementation frequently lags behind. In addition, the various jurisdictions are not moving at the same rate or with the same level of ambition. While the Markets in Crypto-Assets Regulation (MICA) in the European Union has come to an agreement on a comprehensive set of regulations, Congress and the federal authorities in the United States have not yet come to an agreement on rules that are consistent.

Innovation with DLT

There is a persistent belief that innovation must have space at all costs. Because Bitcoin is built on a brand-new technology called DLT or Blockchain, it has a lot of potential for change. First, despite the lofty hopes for the future, these platforms like bitalpha have so far produced little benefit for society. Second, using a promising technology does not guarantee that a product based on it will have more value.

Conventional Financial Sector

The conventional financial sector has also been tempted to make bitcoin easier for customers to access due to the alleged sanction of regulation. Insurers and banks, as well as asset managers and payment service providers, are all affected. First, it uses enough energy to power entire economies. It is estimated that mining bitcoins requires the same amount of electricity each year as in Austria. As it shows on fxmag, it generates huge quantities of discarded hardware. The system's inefficiency is a feature, not a flaw.

The Last Word

Promoting Bitcoin carries a reputational risk for banks because Bitcoin appears to be unsuitable as either a payment system or an investment, so it should not be legitimized in regulatory terms. In a similar vein, despite the possibility of short-term profits (even if they have no stake in the game), the financial sector ought to be wary of the long-term consequences of promoting Bitcoin investments. Once Bitcoin investors have sustained additional losses, the impact on customer relations and the industry as a whole's reputation could be significant.