On Friday, bitcoin continued its decline, breaking the level of $38,000. Many investors, who until recently were enamoured of super profitability of the cryptocurrency market, are now questioning any of its value. So, does bitcoin have value?
Currently, the total market capitalization of all cryptocurrencies is over $2 trillion, despite their recent failures.
In 2021, people spent more than $44 billion on non-interchangeable tokens or virtual property rights for digital objects. This sum almost amounted to the total size of the world's art and antiques sales in 2020. The terms "Web 3.0," "token," and "blockchain" have become common to everyone.
Though the first bitcoin was mined 13 years ago, the majority of people believe nothing will change if the crypto industry disappears.
It is common knowledge that the absence of the internet would be a big shock to the world's population.
However, what if cryptocurrency disappeared in 2022? Except for the millennial billionaires with cryptocurrency assets, nobody would probably be concerned about it.
Besides, it is possible to show that cryptocurrency is now at about the same stage as Web 1.0 was in 2004.
There are about 71 million Ethereum addresses and about 40 million bitcoin addresses with non-zero balances. These numbers are in the same order as those of online auction company eBay Inc. in 2004: 56 million active users who bought or sold something that year, and 20 million active accounts in the payment segment, serviced by PayPal, and partly by eBay Inc.
Coinbase Global Inc., the biggest US cryptocurrency exchange, has about 2.8 million monthly active users. E*Trade Financial Corp., one of the first Internet brokers, reported 3 million active brokerage accounts in 2004, while TD AmeriTrade Holding Corp., another company in this field, has 2.6 million brokerage accounts.
The market capitalization of the NASDAQ 100 Index, a mirror of the nascent Internet industry, reached $2.5 trillion in late 2004, like the cryptography today.
However, investors express concern about the fact that blockchain technology has not yet become common. Currently, the number of crypto users is about 200 million people. This figure is too low, compared to more than 1 billion Internet users in December 2004.
In fact, people bought such things as books, plane tickets, and pizza on Web 1.0. 13 years later, only few of them use Web 3.0 to shop.
For example, BitPay, one of the largest processors of cryptocurrency payments, processes about 66,000 transactions a month, compared with Visa's turnover of 17 billion.
This is partly a consequence of the cryptocurrency world's inability to reduce transaction costs, an average of 1.4% for both Bitcoin and Ethereum. According to the World Bank, this is more than the current average cost of an international money transfer to Azerbaijan or Georgia. For example, Wise Plc, a transfer company that does not use cryptocurrency, transfers money for only 0.35%, depending on the currency.
There are probably few advantages to switching from traditional banking to cryptography, except for anonymity related to greater risks.
Moreover, cryptography also has some limits, and the current situation with bitcoin confirms this fact.
Back in 2004, the Internet was the main source of election news for 18% of Americans. However, currently, few people know about blockchain's potential for organizing fair elections of remote voting without voter fraud.
People tend to think that blockchain can be applied only to finance. Moreover, it can be accepted if its performance is better than existing technology.
Many experts believe that the current pace of cryptocurrency adoption is still driven by speculation caused by the Fed's extremely dovish monetary policy.
Despite the traditional financial world's avid interest in new, often profitable crypto assets, it has taken advantage of them so far.
For example, BlackRock Inc. investment in bitcoin futures worth $6.5 million was regarded as a crucial breakthrough. However, this figure is less than what BlackRock had in shares of cybersecurity company McAfee Inc. in the third quarter of 2004.
The argument is often made about the legitimacy of the whole industry. Thus, the Internet companies of 2004 that experienced the dotcom crash, such as Amazon.com Inc. or eBay, were legitimate, though risky investments. Notably, Amazon bonds were priced below investment grade in 2004. As for the dotcom boom itself, the frenzy in regulated markets cannot be compared to current little interest in cryptography.
Some people consider cryptocurrency to be highly confidential, lacking risk to the global financial system. However, at the same time it has no government control. Besides, Web 1.0 embodied the same features.
Nevertheless, cryptography has become an essential part of everyday life, though this fact is not yet obvious.
The major reason for this is the inability to fake the results of decentralized computing.
This possibility opens unique opportunities: elections and lotteries without fraud, unique digital signatures for electronic documents that cannot be forged (there is no need to go to a notary to certify contracts).
The world could change forever due to blockchain technology. Besides, finance is the first sign of the new world order.
It is common knowledge that the real breakthrough for cryptography will occur when people consider it an indispensable part of everyday life, as it was with the Internet in 2004.
However, the industry is currently developing and requires technological breakthroughs, even in areas where blockchain has obvious applications, such as payments or contract creation.
Moreover, statistics or a single event will not be a turning point. Instead, one improvement will be followed by the next one, until the world will be dependent on blockchain.
What is the BTC value in this system, and what will it be in 10 or 50 years? It has been mentioned many times that bitcoin has a special place even among other altcoins as it is historically the first cryptocurrency.
Currently, the notion of bitcoin's value has changed: its production is becoming too expensive, especially for the planet. It means that its production will stop one day.
Could bitcoin disappear? To exist, computing has to run uninterrupted.
The truth is that bitcoin will not disappear.
At some point, the global community of BTC owners will decide to embody bitcoin in a physical medium, in a coin or rather in an NFT token that can be freely exchanged for their bitcoins for a certain amount of time, just like they do when a new currency is introduced. So, bitcoin will continue to exist as a means of payment and as an art object at the same time. Besides, its value will only increase every year.
Is it advisable to divest bitcoins? I recommend buying them as they have declined. Besides, they will fall for some period, and then they will be super volatile for another five years at most.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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