Is Bitcoin dead?
Why people are switching back to cash
During its peak in November 2021, Bitcoin reached a value of over US$67,000 per unit. Currently, it is worth less than US$25,000, less than half of its peak amount and the lowest in 18 months.
At the time of writing, Bitcoin saw about 1.15% value increase in US$, though in the past five days, the value had gone down about 24.47%. It is currently valued around $22,265 per unit.
This unpredictable rise and fall of Bitcoin makes it a risky investment for many, and the recent crash in the cryptocurrency market means many dedicated crypto owners are going back to cash. But why is that?
Other cryptocurrencies
It's not just Bitcoin. The whole cryptocurrency market has seen a drastic fall recently.
As of June 13, 2022, the global market cap of cryptocurrency decreased to $977 billion, recording about 12% fall in one day.
Even though non-Bitcoin cryptocurrency, called altcoins, have always held lesser market value than the popular Bitcoin, current times are their roughest yet.
The current value of Ethereum is at its lowest in over 14 months, around $1188 per unit. Solana has fallen drastically further, currently around $27 per unit.
Other altcoins such as XRP, Binance USD and Cardano are currently valued at around $0.31, $1 and $0.49 respectively, as per reports from CoinDesk, the global digital currency data platform.
Reports predict that due to upcoming regulatory restrictions, the value of altcoins might fall further, and many smaller altcoins might cease to exist.
Why is the value of cryptocurrency falling?
Global experts believe that investors don't deem cryptocurrency as a reliable, risk-free asset anymore.
According to Edul Patel, co-founder and CEO of the global crypto investment platform Mudrex, the US Federal Reserve has been putting pressure on the crypto market. The increased inflation in recent months has correlated to an increase in interest rates.
Popular cryptocurrencies such as Bitcoin and Ethereum faced severe losses due to a sell-off following the data showing US inflation hitting its highest in 40-years, says Patel.
Patel also predicts that this downward trend will continue for a few more days, showing a further dip in the value of cryptocurrency.
Shivam Thakral, CEO of BuyUcoin, an Indian crypto exchange firm, also believes that global inflation is the main culprit behind the decline of cryptocurrency. According to him, the consumer price index recently reported the highest inflation since 1981 - spelling disaster for the current crypto market as less people are inclined to invest in cryptocurrency.
Since countries all over the world are suffering from high inflation numbers, investing in cryptocurrency is a risky move for anyone, especially global investors.
Why people still prefer cash
The main reason why people still prefer cash over cryptocurrency is simple: cryptocurrency is volatile.
For example, even doing something as simple as buying coffee can come with unprecedented risks. "If you pay $3 for the coffee, tomorrow your Bitcoin could be worth $30. That is a huge loss," says Ollie Leech, editor at the global cryptocurrency news outlet CoinDesk, as reported in Time.
The very nature of cryptocurrency is unpredictable. Since cryptocurrency performs via a peer-to-peer, decentralised system, it is hard to determine what the actual monetary value of a unit of cryptocurrency could be for a general amount of time.
Fiat currency, i.e. government-issued currency that runs under a centralised nationwide operation, has a value generally more stable than cryptocurrency. While it is true that fiat currency is also susceptible to price rise and falls, the changes are generally less drastic than the value alternations in cryptocurrency, which can produce wildly variable results based on user preferences worldwide.
Even though cryptocurrency can be a boon for certain international transactions and often provides more online security based on associated blockchains, the asset protection and custody provided by government-backed fiat currency makes the latter a more preferable option in the long run.
As reported by TradeStation, a global provider of brokerage and online trading services, cryptocurrency aims to remove intermediaries, increase cost-efficiency and advance customer access and control. However, it still cannot provide the price stability and national protection that fiat currency can.
Combine all these factors into the fact that there is absolutely no guarantee that cryptocurrency can be a reliable source of monetary value for the future - you get the bigger picture as to why many would prefer switching back to cash again.