Under the pressure of the Fed's interest rate hikes, the market's hype for cryptocurrencies has been dashed.
Cryptocurrencies that have been controversial since their inception have slashed their waists, and some have even fallen to their heels. As the leading cryptocurrency boss, the intraday price fluctuated around $25,773 on June 13, 2022, down 72.6% from the 2021 highest price
Historically, it has been the norm for cryptocurrency prices to skyrocket and plummet. For example, Bitcoin has appeared in 2018, 2019, and 2021, and it is not uncommon for the increase to double. Since the current use of cryptocurrencies in the macro economy is very small, behind each of its sharp rises and falls, the essence is speculative forces taking advantage of the opportunity to make waves. Countries such as China, Spain, the United Kingdom, and Italy strictly restrict or regulate cryptocurrency-related advertising in order to protect the interests of their investors.
Similar to commodities or financial assets, the price of cryptocurrencies fluctuates around their own value. There are two ways to estimate value, one is the cost of output, and the other is to predict the discounted present value of future cash flows. As a cryptocurrency as an interest-free asset, the lower limit of its price is determined by the cost of production, and the upper price limit is determined by the acceptance of the market.
Taking Bitcoin as an example, those cryptocurrencies that are relatively highly accepted by society, although the price has repeatedly fluctuated and countless people have gone bankrupt, their value has always been able to climb to a higher level every few years. The low level of acceptance is due to the long-term lack of interest, and the price fluctuation is small, but it is not a lack of opportunity. Theoretically, the less circulating, the easier it is to be charged. If it is favored by which "big guy" and takes the opportunity to speculate, the price may also soar a round.
The struggle between the government and capital over the "monetary" rights
Cryptocurrencies are all the rage in the last decade. By holding high the banner of anti-inflation, Bitcoin ate the first crab, and hundreds of cryptocurrencies were subsequently pushed to the market by behind-the-scenes capital. According to Statista, from 2013 to May 2021, the types of cryptocurrencies grew from less than 100 to about 5,400, an increase of 82 times in 8 years.
Whoever controls oil controls all countries; Whoever controls the food controls the human race; Whoever holds the right to issue money controls the world. There is a famous saying in the "History of the Marquis of Huaiyin", "Qin lost its deer, and the whole world expelled it.". In the currency dispute, the thousands of people in the market who have trading needs are "deer", credit currency representing the interests of the government, and cryptocurrencies representing the interests of certain capital, jointly striving for market share.
Monetary finance believes that money should have three basic functions of trading medium, unit of account, and store of value, and cryptocurrencies are not currencies because of their high price fluctuations and do not have the latter two basic functions. On the other hand, however, decentralization is the root cause of the cryptocurrency's high volatility and its core advantage in competing with credit currencies backed by national sovereignty.
Whether something can be used as money does not depend on how money is defined, but on how many people are willing to use it as a medium of exchange. If enough people are willing to endure the high volatility of cryptocurrencies for various reasons, hold and use them, it is bound to threaten the market share of credit currencies. The Central Bank of Russia believes that cryptocurrencies have the characteristics of pyramid schemes, undermine the sovereignty of monetary policy, pose a threat to their financial system, and cause a series of problems such as unproductive electricity consumption.
At present, the attitude of different countries towards cryptocurrencies varies greatly, some strictly prohibit the production and circulation of cryptocurrencies, and some have a relatively relaxed attitude, and even allow futures contracts with cryptocurrencies as the underlying to be listed. In economies with relatively loose regulatory policies, although some business organizations claim to accept cryptocurrency payments, the market share of cryptocurrencies is far from being comparable to that of credit currencies, and its biggest function is still speculation.
Although some central banks have launched digital currencies, because they are still sovereign credit currencies by nature, they are far less attractive to "just need" users than decentralized cryptocurrencies. Some people create wealth by launching cryptocurrencies, some people want to use cryptocurrencies as a hidden wealth and circumvent regulation, and some people speculate and speculate to earn profits. Objectively speaking, the market demand for cryptocurrencies is very large, so despite such and such chaos, it can still flourish.
Competition between cryptocurrencies
Cryptocurrencies compete not only with sovereign credit currencies, but also internally. According to the data of the coin world network, the circulating market value of Bitcoin in cryptocurrencies ranks first. Most of the time, Bitcoin accounts for 40% to 50% of the total market capitalization of cryptocurrencies, and the second-ranked Ethereum accounts for less than 20%.
In terms of market capitalization, Bitcoin accounts for half of the cryptocurrencies.
Decentralization is the biggest scam in cryptocurrencies. In fact, most cryptocurrencies are concentrated in the hands of Bitcoin's development team and a handful of big mining owners. Latecomers who want to participate in the cryptocurrency feast must first spend a lot of money and buy it from other holders. People who are not willing to take over the market have found another way and set up their own portals, so the total amount of cryptocurrencies in the world is increasing. These people improved Bitcoin's algorithms, created a wide variety of other cryptocurrencies, and then used various means to bring them to market in the hope of making a profit.
Cryptocurrency market share depends on three major factors, first mover advantage, algorithm advantage, and celebrity promotion. The earlier it is developed, the more the characteristics of the algorithm meet the needs of society, and the greater the market share. Although there are many types of cryptocurrencies, there are only a few that have outstanding advantages, and if you want to catch up later, you must make more efforts in marketing.
Musk is a long-time dogecoin supporter, and in order to promote Dogecoin, Musk announced late last year that Tesla would let customers buy some goods with Dogecoin, including the company's Cyberquad for Kids and Cyberwhistle. Local time, on January 25, Musk said on social media that McDonald's should accept Dogecoin as a payment method, and said that if McDonald's accepted, he would live-stream a happy paradise package.
McDonald's responded that unless Tesla accepts grimacecoin, McDonald's will accept Dogecoin payments. Grimacecoin is a fictitious cryptocurrency that mimics McDonald's mascot Grimace. Shortly after Musk and McDonald's interaction, more than a dozen altcoins named "Grimace" were born on the market, and the price of one Grimace Coin soared nearly 53 times in a matter of hours to $0.00396116 per coin.
The vitality of cryptocurrencies is rooted in the dark side of humanity
So far, cryptocurrencies have not been found to be of any help to increase human productivity, but instead facilitate transactions for many illegal practices. Existence is reasonable, but existence does not mean justice. If the law is just, then cryptocurrencies that can decentralize and isolate regulation are unjust.
Credit money can only be created by central banks, and cryptocurrencies can be produced by everyone, which is the theoretical basis for its decentralization. But on the flip side, cryptocurrency algorithms are designed, and most people simply don't have the ability to identify if the algorithm has vulnerabilities. In addition, each cryptocurrency is concentrated in the R&D team that launched its algorithm, or in the hands of big miners.
The world can have an infinite number of specific algorithms, so new cryptocurrencies could be created at any time. The total amount of Bitcoin is limited, the total amount of Ethereum is limited, and the total amount of Dogecoin is also limited, but the types of cryptocurrencies can be unlimited. Therefore, the number of cryptocurrencies is growing even faster than credit currencies, and the use of cryptocurrencies to combat inflation is just a deceptive gimmick.
Central banks over-issuing money can also boost economic growth while bringing inflation. The issuance of cryptocurrencies has no benefits other than consuming social energy, harvesting people's wealth, and facilitating transactions for illegal acts, and should be abandoned by society. However, after many well-known cryptocurrencies have been cut off, the voice of discussion in the market has gradually emerged. Its vitality is clearly rooted in the dark side of human beings, and the more conspirators, speculators, and illegal acts in society, the more difficult it is for cryptocurrency credit to go bankrupt.