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Is Cryptocurrency Over?

2022 has been a very tough year for the cryptocurrency market. Since its beginning boom, it has had investors worldwide investing trillions of dollars, becoming a strong competitor of the stock market. However, the cryptocurrency market is highly volatile. The 2022 crashes of several crypto companies, paired with Ponzi schemes and hoaxes, have proved many customers' fears of investing in the cryptocurrency system.  


The most famous cryptocurrency, Bitcoin, plunged 15% this November, and now a bitcoin is worth a little over $16,000. However, compared to its initial boom, during the pandemic, where at its peak, the value of a bitcoin was 60,000 dollars, Bitcoin has suffered a massive loss in profit and credibility. According to the newly published research by the Bank for International Settlements, nearly 70% of the investors in the currency have lost money so far. 


However, the largest crypto fiasco this year was FTX's bankruptcy, which had rapidly become the most prominent cryptocurrency before its demise. The company, created by then 30-year-old billionaire Sam Bankman-Fried, was valued at 16 billion dollars; overnight, all of that disappeared.


In the weeks after the crash, Bankman stepped down as CEO and has been under intense media scrutiny. He has been investigated by federal prosecutors and is now facing a possible 115 years jail sentence for wire fraud, money laundering, and lying to investors. In addition, he is fundamentally accused of using customer funds deposited at FTX to place risky bets in his other company, Alameda Research. 


FTX's bankruptcy has caused a ripple effect, causing a 60% downfall of some of the biggest cryptocurrencies. Unfortunately, it also ensured the loss of credibility in the system, beneath the cryptocurrencies, whether there is safety within that financial market. Furthermore, as many know, speculation is the death of financial markets, especially within a market that is easy to partake in and tough to understand.


FTX's bankruptcy shook the world of crypto so fiercely because it reaffirmed to investors and customers of technological markets that the "boom and bust" effect is more accurate now than ever. Because of the rapid rise of this billion-dollar exchange market, the crash's impact causes waves worldwide that should only happen occasionally. The impact and magnitude of the FTX crash have affected stocks worldwide, as well as economies, charities, foundations, and hundreds of companies.

When a trade market becomes expendable to everybody and acquires such enormous scope, mistakes cost a unanimous distrust in the same system. So with one company, all the others within the system fail to succeed subsequently. 


When the 2008 Sakamoto paper on Bitcoin came out, the core values beneath cryptocurrency were centered around the idea of a peer-to-peer economy, a futuristic vision of a world where trade markets did not depend on governments and banks. After the 2008 recession, that was not only a hopeful utopia but something that almost seemed necessary to the evolution of markets and economies that depended too heavily on the stock market exchange system. That crash in the economy forced billions of people and nations into impoverishment and severe recession, which we still have not recovered from.


However, the values shared then by crypto entrepreneurs were only developed by some. As a result, many entrepreneurs have robbed their customers of billions of dollars, money laundering, perfect Ponzi schemes, and even faking death, disappearing with customers' money. 


Surprisingly, even 14 years after its start, cryptocurrency has not entered the traditional market economy, and more importantly, it has never been regulated. Governments and Banks are at the epicenter of the stock market. They regulate the risk and investments, and the stock markets are backed by the credit of the nation's government. 


Meanwhile, the only validity cryptocurrency can have the trust of the entrepreneurs behind it and their expertise in risk management, which is where most of these companies fail. How will they replace the stock market and improve the trade exchange system if they cannot even provide fundamental trust in the customer's financial safety? 


Back in the day, one could have thought of cryptocurrency as a "weird, tech people thing," now we must re-evaluate that, as most of these companies have been re-branding themselves as a financial product to be used by anyone with a smartphone and a bank account or PayPal account. During the pandemic, cryptocurrency exploded, a system that seemed immune to economic pressure, unlike the stock market. 


However, while in 2021, cryptocurrency and crypto values were soaring at their peaks (a Bitcoin was worth 60,000$ in 2021), in 2022, the currency and trust in crypto have been damaged immensely, and people have started to wonder if it will the market will be over soon. Customers have lost faith in the system, and after November's FTX bankruptcy, many wonder whether the government will ever be able to regulate the system. 


The good news is that there is a possibility of that, as, since September, the Federal Reserve has started assessing the possibility of opening Central Bank Digital Currency where the "digital dollar" will enter the world of blockchains. While that would introduce government and bank access to the world of cryptocurrency, it will not be very efficient in regulating the market but ensuring a more transparent approach, knowing that the government will be inserted in the crypto market to keep a "closer eye" to the crypto companies. Of course, much is more to be done to regulate this form of the monetary exchange system, but hopefully, the insertion of the government will be a step in that direction.



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Tags: Bitcoin Cryptocurrency CBDC Ftx FTX Bankruptcy SBF stock market


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