What is the next crypto currency bubble
Anyone who tries to buy goods in the supermarket with Monopoly money runs the risk of being admitted to a closed institution. In principle, Bitcoin is nothing else, the apparent value of which is based on a scarcity simulated in the computer. To put it simply, bitcoins are mined by solving a math problem. At first, anyone could do this with their own laptop. Today, however, huge power-consuming systems are required for this.
The basis for this is provided by the blockchain, a continuously expandable list of data records, called “blocks”, which are linked to one another using cryptographic processes. In order to prevent manipulation, the miners come into play, who are rewarded for their activities in bitcoins. When a block of transactions has been generated, the miners take the information from it and use a mathematical formula to transform the transaction and other information into something much shorter, namely a string of letters and numbers (hash). This hash is stored in the block at the end of the blockchain and also uses the hash of the previous block. This confirms that the current block and the one before it are valid. The big challenge for miners is: The closer the Bitcoin upper limit of 21 million approaches, the more complex the computing tasks required to generate new Bitcoins become.
In the meantime, 16.74 million Bitcoins have already been mined. The cost per transaction increased from $ 7.43 at the end of 2016 to $ 109 by December 15, 2017 alone. A lack of trust in the monetary system ultimately enabled a price explosion that is second to none, in line with the increasing complexity of calculations.
Critical facts and a currency with a good chance of survival
• In the meantime, not a day goes by without hype reports regarding the price explosion of various crypto currencies and even "in the deepest province" there are more and more multi-level marketing systems around trading in cyber currencies in circulation.
- Since the market launch at BitcoinMarket.com at 0.3 US dollar cents on April 25, 2010, the value of a Bitcoin has increased 6.27 million times or to over USD 18,812 (as of December 16). That is a higher return than with a lottery six. Meanwhile, many “currency creators” want to participate in the cryptocurrency boom with their “Better Bitcoin”. As of December 15, 2017, there were already around 1,400 cryptocurrencies with a total market capitalization of around USD 500 billion. At 55.5% (USD 298.5 billion), the lion's share of this is Bitcoin. Far behind is Ethereum as number two with a market capitalization of USD 67 billion or a market capitalization share of 12.4%. Ripple has recently caught up massively, gaining 70% within 24 hours in mid-December and now in third place with USD 31.2 billion (5.8% market share). In contrast to the competition, Ripple is not trying to establish its own financial system independent of banks and the state, but wants to cooperate with banks. The aim is to be able to make a transfer in the same time it takes to send an email. That could even secure Ripple's existence in the long term. The next largest currencies are Bitcoin Cash (29.5 billion USD), Litecoin (16.8 billion USD) and IOTA (10.7 billion USD). While those affected by Bitcoin are already complaining about a transaction duration of up to 33 hours, IOTA allegedly solved this problem with a "new blockchain" generation. That puts speculators into euphoria. But be careful: In general, the hype has now reached the second row of crypto currencies - an indicator of an advanced phase of a boom.
- According to the motto “Where there is no plaintiff, there is no judge”, the cryptocurrency market is susceptible to possible price manipulation, because around 1,000 market participants currently own 40% of all Bitcoins and the top 100 17.3%. The concentration is even stronger with other crypto currencies. In the case of Gnosis, Qtum or Storj, the 100 largest owners hold more than 90% of the currency.
- Bitcoin, a polluter for the environment: All mining consumes an enormous amount of electricity, namely, according to the Bitcoin Energy Consumption Index, it consumes almost 30 terawatt hours (0.13% of global energy consumption) or more than 159 countries.
- Bitcoin assets can fall victim to hacker attacks and those who forget their password no longer have access, as there is no central service point that has customer data
These facts alone show that there are no traces of a stable currency, safekeeping of value and a suitable medium of exchange. Rather, the whole thing is reminiscent of pyramid systems in which earlier beginners make enormous profits at the expense of those who follow.
Regulation - the stitches are tightened
For Goldman Sachs CEO Lloyd C. Blankfein cyber currencies are “a tool with which to commit crimes”. In any case, "underground business" is carried out with Bitcoin and Co. The regulators are slowly getting enough. China has already banned ICOs and cryptocurrency trading. Now South Korea also wants to take regulatory action, followed by Malaysia. And in the UK, the Treasury Department wants the anti-money laundering and terrorist financing laws to be applied to virtual currencies in the future. Providers of British online wallets must expect that they will reveal the identity of their customers at the request of the authorities and they must proactively report suspicious transactions.
OeNB experts speak out in this country Beat Weber on December 9th on the subject of regulation to the daily newspaper courier as follows: “The issuance of crypto currencies could not be regulated at all, but the interface to the official currencies could. With the next EU money laundering directive, Bitcoin platforms need to know their customers. Many are already preparing for this. ”In addition, the tax authorities will soon become active: In the USA, strictly speaking, all cryptocurrency users are under general suspicion of tax evasion. For example, the US tax authority, the IRS, required the Coinbase trading platform to provide information on the identity and transaction history (2013 to 2015) of all US customers who carried out transactions of more than USD 20,000. The appeal called "John Doe Subpoena" is aimed against taxpayers whose names are unknown and was first used in 2008 to break Swiss banking secrecy.
Conclusion: The combination of a hype that is at the center of the media with initial regulatory efforts and investigations by the authorities is a dangerous market constellation that indicates an increased risk of a crash.
Author: Michael Kordovsky ([email protected])
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