Is It the End of Cryptocurrency? Reasons behind Its Recent Downfall
Looking at the recent cryptocurrency valuations, it’s quite clear that the bubble is on the verge of bursting. People made thousands of pounds in profit when the valuations rose. However, due to multiple bans and global issues, cryptocurrency is declining. Well, it’s not the first time this digital currency system has witnessed a downfall. It has risen on multiple occasions.
While many investors have sold off their crypto assets. Some are still holding on, hoping that there is light at the end of this extremely dark tunnel of devaluation. However, looking at the current situation. We believe cryptocurrency is just another overhype technological trend with no future.
Here are ten reasons why we are not optimistic about this decentralised financial framework.
1. Cryptocurrency is still far from usable in the real world
Cryptocurrency has been around for more than ten years. However, even though it was hype as the successor to physical currency. This digital currency is still not used regularly. Cryptocurrency transactions can only happen through a cryptocurrency exchange. As a result, it has become a highly vulnerable stock rather than a currency a regular person can use for daily expenditures. While companies have tried to accept digital currencies like Dogecoin and Bitcoin. They were quickly helded back by the lack of real-life utility. Investors are urging people to accept cryptocurrencies. But the system is far from usable and reliable.
2. Valuations are highly vulnerable to nonsensical factors
The valuation of cryptocurrencies changes every minute. By the time you’re reading this blog, the cryptocurrencies in your portfolio might see a significant rise or downfall. However, that’s not the most worrying thing about this situation. After comparing valuations with transaction data. The rise or decline of value doesn’t make any sense. Visa and MasterCard are two of the biggest financial transaction companies in the world. They are also use to buy and sell cryptocurrencies like Bitcoin, Ethereum, and Doge. While it seems obvious that the market cap of Visa and MasterCard should be exponentially higher than these cryptocurrencies. The numbers tell a different story. These three crypto giants have a higher market value than Visa and MasterCard. It’s extremely bizarre and nonsensical.
3. Businesses and countries are still sceptical over adopting cryptocurrency
While some businesses did try to accept crypto payments for their products and services. This progress was short-lived. Blockchain is an impressive technology without a doubt, and it might play a pivotal role in the development of other future technologies. However, as of now, companies and countries do not trust a blockchain-based digital currency system. It might be a lot more efficient than the current transaction system we use. But, what looks like a better option on paper is often not very convenient in real life. Moreover, the abnormal market gains and losses show that this currency is unreliable. The risk is high enough to deem cryptocurrencies as unstable.
4. Anyone can create their own cryptocurrency
Anyone who knows blockchain programming can create a cryptocurrency of their own. There is no regulatory body limiting creation of different digital currencies. As of now, over 10,000 different cryptocurrencies are operating, with no regulatory barrier whatsoever. The crypto market is getting excessively saturate and with an unlimited number of currencies. The competition looks bizarre and unrealistic.
5. Decentralization is still a dream
The main goal behind having a blockchain-controlled digital currency was to keep transactions decentralized. No person or group was supposed to have any ownership or control over the network. However, cryptocurrency is still pretty much centralized. Popular currencies like Bitcoin, Ethereum, Shiba Inu, and DogeCoin are still mostly owned by a certain number of high-profile users. For example, almost 82% of all DogeCoins are owned by just 535 high-profile crypto portfolios. These 535 individuals have the power to collectively influence. The valuation of this currency, which is certainly not a good sign.
6. It is being affected by the tweets of a single person
Elon Musk is a very significant personality these days. His businesses are booming, and his net worth keeps increasing exponentially every now and then. Musk was quote excited about cryptocurrency, as he used to support it through his tweets. He purchased Bitcoins worth 1.5 billion dollars in February 2021, which caused a massive valuation hike. He also announced that people could buy Tesla’s vehicles through Bitcoin. However, after just 49 days, Musk announced that his electric vehicle company had stopped accepting Bitcoin. Now, he is more focused on DogeCoin. Unfortunately, Musk’s tweets and preferences bring significant movement in the crypto exchange. A currency deemed to be a reliable alternative to a physical currency. In the future should not be influenced by a person’s tweets.
7. Most governments do not want to adopt cryptocurrency
Most governments do not want to allow a currency in their financial system that they have no control over. They want a financial system that their respective central banks back. As a result, countries like India, China, and Pakistan have regarded the trading and mining of cryptocurrency as illegal. This also puts the future of technologies like the hype Metaverse in serious jeopardy. As NFTs can only be bought or traded using cryptocurrencies. This global boycott against digital currencies makes it even more unlikely for cryptocurrency to survive in the long run.
8. Cryptocurrency does not correlate with other real-world valuable entities
Cryptocurrencies’ valuations do not correlate with the valuation of entities like the US dollar or gold. As we know, when the dollar rises, the valuation of gold decreases in most cases. This inverse relation has been a thing for multiple decades. However, a cryptocurrency currently has nothing to do with global inflation. Instead, its valuation is mostly affected by technical and emotional factors. And some of the influential factors don’t make any sense.
9. The Russia-Ukraine War is affecting cryptocurrency
As of now, Russia has initiated an invasionary attack on Ukraine. This is a massive catastrophe on the global stage. The valuation of different items is affecting dramatically, including fuel and wheat. However, different cryptocurrencies have also started crashing. Making matters even worse for miners and traders. Is this the final nail in the coffin for cryptocurrency? We shall see.
10. Cryptocurrency is extremely overhyped
Blockchain sounds like an amazing technology on paper. However, a digital currency based on this framework is not practical. The only reason why it’s still alive is that people are buying it as an asset which can see a dramatic increase in valuation at some point. However, this digital currency system has no utility in real life and, arguably, no future.
Cryptocurrencies like Bitcoins have crashed and risen again in the past. But, this time, with these limitations. It seems highly unlikely that cryptocurrency will be the same ever again.
If countries start accepting cryptocurrencies in the future. Subjects like accounting can get extremely complicate to study. However, accounting is already pretty difficult. Therefore, if you are having issues solving accounting assignments. You might need the help of highly qualified accounting assignment experts.