January 13, 2021 (MLN): Bitcoin on Wednesday plunged as much as 6.8% to about $32,359 before paring some losses, heading for its worst week since March last year.
According to Bloomberg, the largest cryptocurrency touched a record of almost $42,000 on Jan. 8 before tumbling to a low around $30,300. The Bloomberg Galaxy Crypto Index fell as much as 7.1%.
The price volatility sparked memories of the bitcoin's December 2017 bubble that was followed by a rapid collapse. They also examine recent narratives, such as the argument that Bitcoin is maturing in a hedge against the weakness of the dollar and inflation risk, attracting long-term investors.
“Taking some profits off the table after an asset — any asset, not only Bitcoin — doubles in value within three weeks is completely understandable,” said Julius de Kempenaer, senior technical analyst at StockCharts. Bitcoin could reach $146,000 long term as it competes with gold as an asset class if swings in the digital asset moderate sufficiently to lure more institutional investors, JPMorgan Chase & Co. strategists said this month. They also flagged signs of froth that could lead to a pullback in the shorter term, as per Bloomberg.
Hearing the word “cryptocurrency”, we instantly think of Bitcoin… but what actually a cryptocurrency is- it is a completely digital phenomenon that is distributed across a large number of computers, using cryptographic protocols or highly complex code systems, to secure the exchange of their units that encrypt sensitive data transfers.
It is worth mentioning that No control of governments and central authorities make this cryptocurrency unique from fiat money. Instead, decentralized systems and encryption are used to issue new cryptocurrencies, validate transactions, and prevent fraud and forgery.
The first blockchain-based cryptocurrency was bitcoin, a software not a shiny coin embellished with modified Thai symbols. It is the most popular and highly valued digital asset that launched in 2009 by an entity or group calling themselves Satoshi Nakamoto.
This digital currency had surged more than 300% in 2020 as per Reuters. As of January 11, 2021, the market capitalization of Bitcoin is US$ 661.46 while in March 2020, it was US$ 117.81 billion.
The resurgence of Bitcoin in recent weeks and months has been attributed to some factors. The main driving force is the continuous entry of institutional players like Wall Street billionaires, Paul Tudor Jones, American billionaire Hedge Fund Manager, and Stanley Druckenmiller, an American investor and Hedge Fund Manager, who put money in Bitcoin, seeing it as a hedge against inflation like gold. Analysts said that this endorsement boosted confidence in other mainstream investors, resulting in surging in Bitcoin’s price.
The other main driver of this rally is retail investors and their fear of missing out as buying bitcoin is easier now than before, analysts said.
The recent performance of the bitcoin is similar to its frantic rally to almost $20,000 in 2017, followed by a sharp pullback in 2018 that erased billions of dollars from the market amid a broader sell-off in cryptocurrencies. But crypto fans say the current rally is different because it is fuelled by institutional players rather than retail speculation.
Is Bitcoin worth it?
A renowned Pakistan- American Economist Dr. Atif Mian said on his Twitter Account, ‘Bitcoin is socially wasteful and practically useless. It is consuming electricity equivalent to the entire power consumption of Pakistan, a country of 200M+.’
According to him, Bitcoin practically offers nothing. Its value only represents speculative craze.
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