Crypto set for value drop as regulators spy control
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Whether you believe in them or not, cryptocurrencies such as Bitcoin, Ethereum and Litecoin are an important aspect of the modern financial system. Their decentralized control mechanisms and anonymous make them an attractive option for investors and criminals alike and are touted as “digital gold” by banks such as JP Morgan and has even attracted the attention of Elon Musk who purchased $1.5 billion in Bitcoin assets (43,000) for Tesla in February 2021 with the digital currency peaking at £52,000 per coin since.
The automotive mogul has also recently announced that Tesla will begin accepting Bitcoin as a payment option for its products and services and its adoption by financial corporations such as PayPal, Square and CashApp has contributed to its sharp increase in value which has facilitated the holding of BitCoin by many top-rated publicly traded companies.
Pension schemes and funding management organisations such as MicroStrategy Inc., Galaxy Digital Holdings and Square Inc. are currently enjoying a 35%, 88% and 42% increase in the value of their BitCoin holdings since their original purchase respectively and it is precisely because such widely known and respected firms are purchasing the currency that the value of BitCoin has risen so sharply with an increase of 300% over the past year.
Although the cryptocurrency doesn’t currently sit at its highest to date, it appears to be hovering at between £40,000 and 50,000 but shows no sign of crashing absent some catastrophic event, which many in the financial industry are predicting could happen sometime soon. The founder of the Cryptocurrency Exchange, Bobby Lee has warned that the currency is likely to rise further before dropping sharply by 90% of its value meaning that if he is to be believed, you might want to sell your house fast and cash out now before the worst happens.
However, it has been put forward that the increasing value of BitCoin could be hindered by regulations and it appears that this might be the case as the US Federal Reserve, the People’s Bank of China and the European Central Bank look to regulate the trend of adding value to a digital asset with no real backing.
While many see cryptocurrency as an asset worth investing in despite their obvious lack of monetary value which is no concern to central banks, the rising popularity of tethered digital assets such as “stablecoins” is of primary concern since they are monetized with a FIAT currency backing which is a potential threat to the value of a nation’s wealth. It is because of this that the value of cryptocurrencies could fall as powerful countries seek to intervene in the current boom of BitCoin and others.
One investor, Vincent Mortier of the €1.7 trillion funding firm Amundi predicts that although the value of crypto will be hit hard by external intervention and central bank regulation, it will not be enough to keep it down but only inflict a temporary setback for the digital assets as they quickly recover from outside interference. However, Mortier’s confidence in BitCoin as a long-term and viable investment is evidently weak as the firm will no longer offer the digital asset as an investment option to clients.
Whatever the future holds for cryptocurrencies both non-backed and FIAT-based, there remains confidence that their value, both current and future is almost unlimited with more and more investment seemingly driving the price upwards, but if the history of any financial instability has taught us anything, it is that a bubble can only grow so large before it eventually bursts.