Bitcoin was the first popular cryptocurrency, but its high price has ensured its popularity even as the technology behind it has become more outdated and inefficient. Now Bitcoin may finally be in a death spiral.
One bitcoin is still worth about $17,000 at the time of this article’s publication, but that’s a significant drop from the currency’s price a year ago. The currency was at an all-time high of around $68,000 in November 2021 , so if you had bought it back then, you would have lost over 70% of your money. Bitcoin’s value is based entirely on its artificial scarcity algorithm (Bitcoin gets harder to mine over time) and other people’s perception of its value – the latter has certainly suffered over the past year.
After a record high in November, the UK ordered all bitcoin ATMs to close , the Bexplus cryptocurrency exchange closed in just 24 hours , the car manufacturer Tesla sold most of its bitcoin (you could have bought Tesla at some point). cars with currency), and China has repeatedly suppressed cryptocurrency mining operations in its country. It is a disregard for the various hacks , rug pulls, and other incidents that have undermined the credibility of the wider world of cryptocurrencies, including Bitcoin.
Bitcoin made another drop last week along with some other cryptocurrencies, due in part to the collapse of FTX, a cryptocurrency exchange platform. FTX had a partnership with GameStop and publicity during the most recent Super Bowl , but a November 2 report showed that most of the company’s value was invested in a trading company (Alameda Research) owned by FTX CEO Sam Bankman-Freed. This led Binance, another trading company, to decide to sell its stake in the FTX crypto token, which quickly turned into an attempt by Binance to acquire all of FTX in order to keep their investment stable. The next day the deal was closed, the BlockFi marketplacesuspended withdrawals by a client due to its ties to the companies, the Bahamas have frozen all of FTX’s assets , and FTX has now filed for bankruptcy . The situation is so bad that there are renewed calls to regulate the crypto industry, as well as banks.
Similar to the collapse of the Luna and terraUSD cryptocurrencies earlier this year, a chain of liquidity problems has set off ripple effects throughout the trading ecosystem as one company realized that the other did not have as much money as they claimed. Unsurprisingly, this affects the value of many cryptocurrencies ( Etherium also fell 73% last year ), but it hits Bitcoin especially hard.
Bitcoin is unlikely to completely collapse any time soon as there are still many people who see value in the currency, but it is difficult to see the currency return to its previous highs. This is probably a good thing – bitcoin is one of the worst cryptocurrencies in terms of energy efficiency, and bitcoin mining plants often use coal and other forms of non-renewable energy . With increasing climate change and other coins shifting to a better (but still far from perfect) proof-of-stake model, Bitcoin should be left behind.