The rise and fall of cryptocurrency – Opinion – Al-Ahram Weekly

Beginning as a novelty and later turning into a world mania, cryptocurrency has taken the world by storm as an alleged various to common forex. However regardless of the hype and the overinflated values that induced cryptocurrencies reminiscent of Bitcoin to be valued at as much as $64,000 final yr, actuality has struck within the plummeting costs of all cryptocurrencies and the entire crash of a few of them.

Cryptocurrencies depend on the phantasm that they are often exchanged exterior the boundaries of typical banks transactions or governments restrictions, each of which have appeared alluring for shady or underground companies. However the actuality is that the method of buying this sort of forex is flawed, and so they can’t be the supply of any legitimate type of manufacturing.

Whereas all worldwide currencies are issued beneath the authority of governments, the manufacturing of cryptocurrencies depends on “mining” them by way of computer systems and pc graphic playing cards that work across the clock to make these extremely coveted currencies out there to their customers. The mining is completed by way of fixing complicated algorithms, and the longer a pc stays on the job, the bigger chunk of Bitcoins it may possibly collect.

Much like the gold rushes that came about in international locations such because the US and Australia within the nineteenth century, a cryptocurrency rush has occurred over the past decade aiming to construct wealth by way of these currencies just by having computer systems produce them. Crypto-mining farms have been constructed world wide with hundreds of thousands of pc processors and graphic playing cards stacked collectively to supply monumental quantities of cryptocurrencies at ever quicker charges.

Billions of {dollars} have been invested in organising farms with ever better processing capabilities. One farm stationed in Iceland known as the Genesis Mining Farm is thought to be the biggest on this planet and consumes extra vitality than every other firm on this small nation.

Billionaires popping out of the crypto-mining enterprise embrace the Cameroon and Tyler Winklevoss twins within the US. The latter was one of many individuals behind the founding of Fb, and he’s believed to have turned to the Bitcoin market after Fb founder Mark Zuckerberg was pressured to settle a court docket case in 2004 for copying his authentic supply code as the principle concept behind the social-media platform.

In the present day, this dream of amassing riches past creativeness has been developing in opposition to actuality, and all the crypto-mining market crashed this yr, shedding over $2 trillion from its market peak at over $3 trillion in November 2021. Rising inflation charges throughout the globe together with the financial disaster that has hit the world’s main economies following the Covid-19 disaster and the Ukrainian-Russian conflict have additionally contributed to the sharp fall within the worth of assorted cryptocurrencies.

Bitcoin, probably the most well-known, has taken one of many worst hits and shaken investor confidence in all the market. The forex is now valued at round $19,000 from an all-time excessive of $64,000 in April 2021. These unimaginable losses have delivered a knockout blow to different lesser-known currencies reminiscent of Terra Luna. This misplaced 99.99 per cent of its worth after dropping from $117 in April to $0.02 in Might this yr, wiping out $40 billion of investments. Its Korean founder Do Kwon is being hunted by traders, and an investigation by the Korean authorities was launched final month.

Old fashioned billionaires and monetary specialists kept away from indulging within the cryptocurrency mania that’s now bursting and inflicting billions of {dollars} in losses for its traders. US billionaire Warren Buffet acknowledged that he wouldn’t purchase all of the cryptocurrency on this planet for $25 if it have been supplied to him. On the similar time, he pressured that if he have been supplied one per cent of the farmland or flats within the US for $25 billion, he wouldn’t hesitate to write down a cheque for that quantity, since not like cryptocurrency these are productive property.

US billionaire Invoice Gates, the founding father of tech large Microsoft, additionally stated cryptocurrency had failed for a similar causes. As previously the richest man on this planet and at present the fourth richest, Gates stated that he didn’t spend money on cryptocurrency as a result of he would solely spend money on “issues which have precious output” and cryptocurrency tasks are primarily based on the “better idiot” principle.

An overpriced murals may be purchased by an investor anticipating that one other “better idiot” will subsequently purchase it at a fair greater worth offered that the hype across the work continues, for instance. The tip result’s the overly inflated costs of things that aren’t value even a fraction of their estimated costs in actuality. When the market falls, such issues change into virtually nugatory.

The identical factor is true of so-called non-fungible tokens (NFTs), that are largely digitally produced artworks and are solely produced as single objects in digital or animated kind. Their gross sales witnessed a spike in costs earlier than plummeting on account of the results of the autumn in cryptocurrencies.

Probably the most well-known instances was the sale of the primary tweet by Twitter founder Jack Dorsey on the whopping worth of $2.9 million in 2021 to a Malaysia-based investor. Since it’s an NFT, the client of the tweet, Sina Estavi, supposedly alone has the proper to see it regardless of its being out there by way of any Web browser.

Estavi determined to promote the tweet final April for an enormous $48 million, believing there was a “better idiot” on the market to purchase his NFT. A lot to his dismay, after one week of attempting to public sale it on-line, he acquired bids for not more than $280.

Billionaires reminiscent of Gates and Buffet solid their monetary empires by way of sound investments in varied fields. If there had been an actual fortune to be constituted of investments in cryptocurrencies, they might have jumped on the alternative. However, alas, cryptocurrency has confirmed to be a flawed funding in an unproductive and intangible type of forex that’s dominated by hype generated teams of pc programmers and hackers.

The autumn of cryptocurrency is a pure final result to a mania that swept the globe in search of monetary good points and producing nothing. Whereas some should still argue that this kind of forex has a future, logic and occasions counsel in any other case.

The author is a political analyst and writer of Egypt’s Arab Spring: The Lengthy and Winding Highway to Democracy.

*A model of this text seems in print within the 21 July, 2022 version of Al-Ahram Weekly.

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