It is no news that Bitcoin and in extension digital currency has been experiencing a devastating free-fall recently. Millions of digital currency users may have been in a state of despair the past few weeks most especially yesterday which went pretty wild of the mark.
The price of the renowned digital currency fell as low as 30% in the wake of the China Banking Association warning to member banks of the risks inherent in trading with digital currencies. The decline stabled at below 10% in the afternoon but the damage didn’t end, Bitcoin had lost about $70 billion in market depreciation in the space of 24 hours.
The renowned crypto coin had hit a high of $64,800 around April but incidentally lost about 38% in market value, in what could be tad dramatic.
As if China’s warning wasn’t enough, Elon Musk of Tesla came with another bang-blow: Tesla would stop accepting Bitcoin and other digital currencies as payment on cars. Musk premised his decisions on what he termed as concerns about the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions,” but added that Tesla may accept other digital currencies if they are less energy-intensive than Bitcoin. He further posited that his company would not be selling its Bitcoin.
To add salt to injury, the Chinese Banking Association was very vivid as it posted on its website advising financial institutions to “resolutely refrain” from providing services through the use of digital currencies occasioned by their volatility.
The CBA’s announcement jolted the crypto world as Bitcoin and other crypto-currencies had a fall in stock after the statement.
By Wednesday afternoon, Bitcoin was around $40,310 per coin as it went down more than 7%. Other renowned crypto-currencies like Etherium lost between 7% and 22% of their value.
Digital currencies swinging and falling is not an unusual occurrence but Bitcoin falls around $20,000 in just 24 hours is way too extreme.
The Elon Musk Influence
Tesla Chief Executive had raised the stocks of Bitcoin in February when it announced that Tesla had invested as much as $1.5 billion in Bitcoin. This was greeted with elation among crypto users, especially with the reality that Tesla has started accepting Bitcoin as payment. Bitcoin became a beautiful bride as its fortunes rose up exponentially with the digital currency going on a free high jump.
But the joy was short-lived with Elon Musk performing a decision reversal when he announced that Tesla would be halting the acceptance of Bitcoin as a legal tender for electric cars payment. His reason vis-a-vis potential environmental damage from the mining of Bitcoin was greeted with mixed feelings. The singular announcement had the crypto-currency falling below $50, 000, a development that spread to other popular crypto-currencies.
It is on note that in a study by the Technical University of Munich and the Massachusetts Institute of Technology in 2019, it was discovered that the network of Bitcoin generates an amount of value that is similar to a large Western city or a whole developing country like Sri Lanka.
Conversely, Last year a study at the prestigious University of Cambridge estimated that on average; about 39% of ‘proof-of-work’ mining through crypto was powered by renewable energy, which is majorly hydroelectric.
There were also fears in some quarters that Tesla may later on sell some or all of its shares in Bitcoin but Elon Musk assured in a tweet that Tesla would still hold on to its investment but this was not enough to allay fears as the panic heightened.
The Indifferent Ones
Africa’s giant, Nigeria via its Central Bank had restricted cryptocurrency transactions with major banks months back with the growing scepticism of it not being traced to a source and the ability of hackers, terrorists to latch on its use without being traced. Although the move heralded wild condemnation from the youths of Nigeria, who have found solace in Forex trading with the use of crypto, the government stood its ground.
Digital currencies were projected as the new world replacement of paper money but it hasn’t fully transitioned into the mental agreement of the generality of the world population with scepticism coming from its volatility a major impediment. US Federal Reserve Chairman, Jerome Powell had said that the central bank prefers to call crypto coins “crypto-assets” because of its limited ability to store value, a primary currency function, occasioned by its volatility.
We can hence deduce that cryptocurrency hasn’t yet convinced the world that it is a better option to paper money.
The Heavy Hand Worries
In the United States, officials in Washington have not minced words in advocating for digital currency regulation and this may be a bigger worry as America seem to have a crucial role to play in swinging world opinions to the viability or otherwise of a project.
The Chairman of the Securities and Exchange Commission, Mr. Gary Gensler had inferred last month that digital currency markets would be a major beneficiary from more oversight in the protection of investors.
Facing the House Financial Services Committee earlier in the month, Gensler had said neither the Security and Exchange Commission or the Commodity Futures Trading Commission has the “regulatory framework” for making trades via digital currencies yet. He further posited that he feels the Congress may have to later address the situation as according to him, “there is really no protection against fraud or manipulation”.
The Future Is Not As Bleak
All may not be that bleak and bad as Social Media giant, Twitter CEO, Jack Dorsey together with his digital payment company, ‘Square” are big fans and investors of Bitcoin. Jack has not hidden his love for Bitcoin and despite its current dip, he is actively pushing Twitter to promote its use. Renowned brand, Overstock.com accepts Bitcoin while US oldest bank, BNY Mellon has announced it would infuse digital currencies as a payment pattern for its teeming customers. MasterCard has also indicated it would start certain crypto currencies on its large customer base.
Bitcoin would certainly not go down into oblivion, at least for a long time as more than a whopping 300,000 transactions on average happens in a day, with the probability that it would surpass that in the soon future.
Ayoola Faseyi, an Abuja based Journalist with interest in Technology and Politics. He is a versatile writer with articles in many renowned News Journals.
He is the Co-Founder of media brand, The Vent Republic.
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