Why Crypto's Real Value was Never $3 Trillion
- The first cryptocurrency, Bitcoin, was created in 2011 to allow one currency to be used globally.
- Despite its initial intentions, cryptocurrency is now used as an investment tool for short-term gains and has been subject to various scams.
- The main reason crypto’s value is not $3 trillion is that Bitcoin and Ethereum's price has fallen by 58% since the beginning of the year, which has wiped out more than crypto's market cap.
Cryptocurrency has become increasingly popular over the years. It has experienced many technological advances and had many ups and downs. During its peak, many people were investing in Bitcoin, Ethereum, and other altcoins. Although cryptocurrency had an initial purpose, the current market does not reflect its intentions, which is why some believe its real value was never $3 trillion.
History of Bitcoin
Bitcoin was the first cryptocurrency created in 2011 by Satoshi Nakamoto. Bitcoin’s purpose was to make miners compete to earn a coin from its limited supply of 21 million. The limited supply was a restriction implemented by Satoshi Nakamoto to ensure Bitcoin’s value would not decline due to its endless supply, which happens with inflation since countries can continuously print money.
By imposing a limit, a fixed supply of Bitcoin can be mined, meaning the price of Bitcoin continues to rise over time and will not experience the same events as other fiat currencies such as the US Dollar. Nakatomo’s plan to fix supply to ensure its value does not deter has worked, as it is currently worth $19,780, reaching its all time high of $64,400 in November 2021, and has the highest crypto market capitalization of $384 billion.
Intended Purpose of Crypto
Cryptocurrencies such as Bitcoin and Ethereum were created to provide an alternative to fiat currency. This alternative digital currency would allow people to conduct transactions without government regulations interfering. These platforms would then become known as decentralized financial platforms, which meant they did not rely on government regulations to operate.
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Another purpose of crypto was to allow global transactions without reliance on fiat currency. When countries deal with each other, one currency is stronger than the other, creating a disadvantage. Having one digital currency used by both parties creates a fairer transaction. Creating a fair payment system and excluding governments was the intended purpose of cryptocurrency.
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Crypto’s Current Situation
Although crypto had an interesting concept of allowing users to conduct transactions using the same currency without the need for currency converters, its reputation has changed since the early days of Bitcoin and Ethereum.
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As crypto is a relatively new concept, many people are not completely educated on it, making them susceptible to investing in fraudulent transactions. As a result, rug pulls, and scams are becoming increasingly common, with a recent example being the Squid Game Token.
A rug pull is when the creator of an altcoin has the intention to raise the price of their digital currency only to then steal the investors’ money. For example, after Squid Game began receiving global popularity, one person decided to jump on the bandwagon and create a Squid Game token.
The created token received a lot of hype, with its peak price reaching $2,861. However, once the coin’s creator began seeing the surge in popularity and users, they decided to liquidate all coins and walk away with all the investors’ money, with an estimated $3 million.
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Why Crypto’s Intended Purpose is not Working
Currently, crypto’s intended purpose is not working due to the lack of expertise people have with digital currencies. The concept of investing in various digital assets is still relatively new, and some people have begun capitalizing on novice investors by misleading them.
Furthermore, as these cryptocurrencies are not backed by any financial institutions or governments, those who run these schemes cannot be held accountable. As a result, when the crypto market is surging in value, scammers determine that is the ideal time to try and run a scam on those looking to make a quick buck.
Another reason why crypto’s intended purpose is not utilized is that many people are investing in small cryptocurrencies. Currencies such as Bitcoin and Ethereum are expensive, meaning not everyone can afford to purchase large quantities of them. As a result, when investing in crypto, some investors choose to invest in altcoins, such as Dogecoin. Since these coins have a low value, they can purchase mass volumes and hope they strike gold, similar to penny stocks.
As a result, instead of people buying Bitcoin and Ethereum so they can utilize these digital currencies for everyday transactions, some are prioritizing short-term gains and the possibility of losing their money.
Why Crypto was not worth $3 Trillion
The first reason why the crypto market is not worth $3 trillion is due to the current economic conditions. The past two quarters have had a negative gross domestic product (GDP), the main indicator used to determine a recession. However, the National Bureau of Economic Research (NBER) announced the economy was not in a recession, which shocked most. As a recession brings forth fear about uncertainty, some people have begun selling their positions and holding cash for the near future.
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The second reason cryptocurrency’s value has been reduced is due to the poor conditions of the current crypto market. The TerraUSD collapse reminded crypto investors that the market is volatile and unregulated, leading to the crypto lender Celsius filing for bankruptcy.
Recommended Read: Crypto Lender Celsius Files for Bankruptcy
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Furthermore, Coinbase, one of the other major cryptocurrency exchange platforms, is currently under investigation by the Securities and Exchange Commission (SEC) for its coin listing process. The snatch and grab technique that is associated with many cryptocurrencies is destroying investor confidence. When investor confidence lowers, many wish to liquidate their investments to prevent their investment from lowering in value. As many people had a similar thought process, it led to the price of Bitcoin and Ethereum falling by 58% and wiping out billions of dollars from the crypto market.
As the two largest cryptocurrencies have lost more than half their values since the beginning of the year, it has led to the total value of the crypto market deteriorating.
The Money Wrap-Up
The American Dream is to become a millionaire one day. Unfortunately, saving up, investing in stocks, and waiting until retirement to become a millionaire takes a long time, and some do not wish to wait that long. So, despite crypto’s intentions of allowing people to use an alternative currency all around the world, some decided to take advantage of the opportunity and try to become a millionaire quicker.
Due to the growing impatience, some decided to create and invest in altcoins. However, whilst it has paid off for some, it is much riskier than the stock market and is not the intended purpose of crypto. Furthermore, with the rampant scams during the surging period, many people can also lose a large portion of their investments. Therefore, regardless of the type of investments you decide on, ensure you sufficiently research before investing.
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