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Fall In Bitcoin Value In Depth Analysis

Fall In Bitcoin Value In Depth Analysis

Relevance

  • GS 3 || Science & Technology || Fourth Industrial Revolution || Cryptocurrency

Why in News?

  • Value of bitcoin has fallen in recent years. Larger aspects of Crypto currencies are to be envisaged.

Prelude to the Prevalence

  • Till January, 2019, one bitcoin values almost $3,400, against $15,189 a year ago, fall of more than 76% in just one year.
  • Crypto currency has been falling after one of its best values in 2017.
  • The crash is powered more by a long-pending correction and curbs by China.

The Course of This Fall

  • There were some hopeful situations till 2017 in the context of Bitcoin and Crypto Currency.
  • Investors even termed it the “digital gold” in its fair weather time.
  • Block chain, the technology that provides it, has triggered a series of similar innovations and inventions.
  • Block chain is an online public ledger system that allows digital information to be distributed but not copied.
  • Bitcoin’s prevalence compelled governments to think about it.
  • Some of the world’s big banks went a step ahead and introduced their own digital currencies.
  • Followed by some duplication – from Ethereum and Litecoin to the Bitcoin Private – which came out in 2018.
  • The global financial crisis and public’s loss of trust in traditional currencies and asset classes, helped bitcoin in its demand increased.
  • The dip in its value is seen as a signal of doom for the crypto currency.

Its Future

  • Alternative: Bitcoinas an alternative asset like Gold
  • No Patrons:Cryptocurrencydoes not have any patrons in the form of a central bank or a government or a financial institution of some repute.
  • The existing fiat currencies (those currencies which are backed by the government, e.g. USD, Euro) also have historically gone through many episodes of corrections before they have gained trust.
  • Susceptible to third-party manipulations and government tweaks.
  • So it would take a long time for bitcoin to gain that level of maturity, confidence and enter the mainstream financial discourse.
  • Geopolitics:The emerging formations in geopolitics is another important factor that would help bitcoin and cryptos going ahead.US’s measures such as the tariff hikes on Chinese imports, and China’s counter measures to it
  • These are potential enough to create situations in 2019 where both the dollar and the Yuan could face turbulence.
  • Perceivably, the next financial meltdown is closer, and there is a currency crash looming in the horizon.
  • So it is natural that smart investors with good surplus monies go for alternative forms of assets, and cryptos would be a potential option.

Additional Info

  • Bitcoin is form of electronic cash.
  • It is a decentralized digital currency without any central bank or administrator that can be sent from user-to-user on the peer-to-peer bitcoin network without the need for intermediaries.
  • Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a block chain.
  • Invented by an unknown person or group of people using the nameSatoshiNakamoto
  • Released as open-source software in 2009.
  • Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies,products, and services.
  • Research produced by the University of Cambridge estimates that in 2017, there were 9 to 5.8 million unique users using a crypto currencywallet, most of them using bitcoin.

Mains

  • Cryptocurrency transitions have led to concerns regarding consumer protection, money laundering and financing of criminal activities. Discuss the challenges that exist in regulating crypto currencies.