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Why I Believe Bitcoin’s Collapse Is Imminent (BTC-USD)

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Bitcoin Fall Cryptocurrency Trends Graphs and Charts

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So far, 2022 hasn’t proven to be a particularly good year. Bitcoin (BTC-US Dollar).To be fair, though, it doesn’t look great for most cryptocurrencies or investments in general. Unlike most investment opportunities, however, Bitcoin stands out I think prices are destined to plummet after all. For years, cryptocurrencies have been generally hyped. In addition to the general enthusiasm common to new and rapidly expanding technologies, Bitcoin has benefited from a low interest rate environment and almost non-existent regulatory oversight. However, with interest rates rising, economic conditions deteriorating, and significant pain caused by a lax regulatory environment making headlines, the best days for bitcoin and cryptocurrencies in general are now behind us. I believe in it with all my heart.

Not completely worthless, but not too far off

While this article can be used for cryptocurrencies in general, we recognize that there are a huge amount of differences between cryptocurrencies that cannot be compared accurately. Instead of creating towards , my overall focus will be primarily on Bitcoin, although it will eventually become unexplainable to account for the sheer diversity that exists in the market.

For a long time, we thought Bitcoin was more or less worthless. That’s not to say this isn’t worth it. Clearly, there are economic benefits to being able to instantly send money from one part of the world to another at a limited cost. What that particular amount should be is until the market decides. But I think the idea that there is so much value behind a generic Bitcoin justifying a price of tens of thousands of dollars is absurd. I don’t believe Bitcoin is completely worthless, but I believe its overall value is very limited compared to what the current market values. By the way, it’s not the cryptocurrency itself that transfers money from one point to another, it’s the blockchain technology of value.

I have no doubt that crypto bulls will disagree with me. There are many arguments in favor of Bitcoin and cryptocurrencies in particular. One common saying is that it acts as a store of value. But what is value, after all? When it comes to stocks, the value in question is not the ticker symbol you bought. Instead, it is an ownership interest in a company’s assets, with a final value that is theoretically determined by discounting all future cash flows of that company to date.

Instead of comparing Bitcoin to stocks, a more popular way to justify its value is to liken cryptocurrencies to precious metals such as gold and silver. After all, they have a lot in common. Like gold and silver, Bitcoin can be exchanged for cash. It has an active market that allows the price to be determined moment by moment.In addition, like gold and silver, Bitcoin has finite limits. But when you really dig into it, either these points don’t matter at all, or the comparison is completely wrong.

For example, consider an active market idea with instant pricing. All products are proud of the same. But at the end of the day, I don’t think you’re getting any value out of the fact that pork prices and wheat prices are uniform enough to be easily priced. Instead, what matters is not only the balance of supply and demand, but also their ultimate utility. Bitcoin itself may be limited when it comes to the finite argument, but the total number of cryptocurrencies is growing rapidly.today is often that’s all 20,000 cryptocurrencies worldwide, over 12,000 of which not in regular circulation.

Some might argue that gold and silver act as stores of value because we chose them. According to this logic, even a digital currency could be created as well if enough people adopted it.I counter this point with the argument that the fact that gold and silver are perceived as stores of value is immaterial. data Since 2019, only about 8% of all gold has been used to produce official coins in the United States. A whopping 50% was used for jewelry and 37% for electronics. This left another 5% for various other purposes.As for silver, the most common use Includes electronics. His 35% of the impressive silver is used for the space. 25% will be a combination of coins and medals. 24% fall into the Other category, 10% related to photography and 6% related to jewelry and silverware. Yes, both of these precious metals could be used as stores of value. Ultimately, though, their value comes primarily from their usefulness. Perhaps that image will change once we can wear the bitcoins our great grandparents bought or mined around our necks and use them to power cameras and computers.

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Some people refer to US dollars or other fiat currencies when trying to promote Bitcoin or other cryptocurrencies. However, there are some issues here as well when it comes to comparisons. Bitcoin is promoted as a store of value, but unlike the dollar. Over time, the dollar, by its very nature, gradually loses value. And second, the value embedded in the dollar is driven by many forces that cryptocurrencies cannot replicate. Indeed, there are always market forces that determine the exchange rate of one currency to another. Ultimately, however, the value of the dollar is underpinned by the U.S. government’s ability to tax individuals and organizations, as well as its massive military complex. It certainly helps that much of the world’s trade, including most of the international oil trade, uses dollars.

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data by Y-chart

Bitcoin also lacks the stability you would expect from a true store of value. Any asset can experience some degree of volatility. But think about how gold has fared over the years. Prices he fell 40.3% during the worst recession the precious metal has experienced in recent memory. This he did from early September 2012 to January 1, 2016. But for the most part, the price of gold has risen steadily over the years. A chart containing $10,000 invested in Bitcoin compared to $10,000 invested in the S&P 500 shows Bitcoin behaving like a speculative bubble. It’s not just a speculative bubble, it’s a bubble in the process of bursting. This year alone, Bitcoin has plummeted 64.1% of him while the S&P 500 is down 16.8%. The cryptocurrency fell 72.3% from its highs.

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data by Y-chart

There have been other speculative bubbles in the past. These are sometimes defined as periods when the price of one or more assets is pushed far beyond their intrinsic value and eventually collapses. The earliest recorded example is commonly referred to as: tulip maniaIn the 16th century, tulips first began to appear across Europe, arriving via the spice trade routes that had been established not long before. Starting with the wealthy, tulips came to be seen as a luxury item, and the demand for tulips increased as the middle class sought to emulate the wealthier members of society.

tulip mania chart

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Since 1634, tulip enthusiasts have swept Holland. Specific explanations for how bad the bubble was have been rightfully questioned. Some economic historians believe that some of the stories told are embellished or completely fabricated. But according to some accounts, the rarest variety of tulip bulbs has soared in price until he reaches more than $1 million in today’s money. This was not a rapidly disappearing bubble. The bubble burst in 1637, three full years after it began. Some may tend to mock those who fall prey to maniacs. But in some ways, that crisis was more understandable than the current cryptocurrency bubble. After all, at least the Tulip buyer received something tangible of some intrinsic value rather than a few lines of code.

nankai bubble chart

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Another example I would like to point out is the South Sea bubble. Some of the brightest minds of the time fell prey to the crisis, including the highly respected Sir Isaac Newton. Originally he founded the South Seas Company in 1711 as a way for the British royal family to cover the debts incurred in his two separate wars. Holders of around £9m were forced to waive their debts to the new company in exchange for eligible shares. A lower interest rate on that debt was then arranged and paid to the company, and the amount paid to the shareholders. In order to create some value within the corporation, the South Sea Company was also granted a monopoly on the slave trade with South America, ultimately resulting in some economic benefit. For the sake of brevity, I won’t cover all the details of that crisis. But in short, rampant speculation made the implicit value of the South Sea Company higher than all British assets before the bubble finally burst. The dotcom bubble (as measured by NASDAQ) shows a similar pattern, as the chart below shows.

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data by Y-chart

It often takes some major event for the speculation bubble to finally burst.Bitcoin’s Big Event Ultimately collapse of FTX. Already, there are concerns about the financial stability of other cryptocurrency platforms such as: crypto.com When block phiFollowing the housing collapse of the early 2000s, we’ve seen what happens when space is poorly regulated. And what is clear in this case is that the cryptocurrency market is far worse than the housing market at the time from a regulatory perspective. There are other factors as well. For example, higher interest rates ultimately reduce appetite for riskier assets. And perhaps nothing is more risky than cryptocurrencies at the moment. It’s true that these particular issues could probably be weathered by the industry, but combined with the fact that Bitcoin has no real value, this is all part of the perfect storm to sink Bitcoin. more likely to be. good.

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Honestly, I don’t think this article will change the minds of cryptocurrency bulls. Nonetheless, I would appreciate it if you could refer to it as a point of caution for those who are thinking about entering the market or those who are thinking about entering. After all, Bitcoin has a small value. But its value is only related to blockchain’s potential ability to instantly facilitate financial transactions around the world. Fundamentally, I believe the market for Bitcoin, and more generally for cryptocurrencies, should never have grown as it does today. Perhaps this pain will continue. Of course, it’s possible that Bitcoin and other cryptocurrencies will eventually bounce back and surge past their previous highs. However, I believe that such reprieve is only temporary, as the truth of its nature cannot be escaped.

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