Rising & Falling Crypto
The heightened use of social media regarding cryptocurrencies, alongside promotion by famous faces, has caused a spike in the value of these modern financial means. Furthermore, the loss of jobs and increase in people working from home shows a positive correlation with the rise in popularity of cryptocurrencies. This article will discuss various specific cryptocurrencies, considering both the reasons for their ascensions and the possible future challenges they may face.
What are Cryptocurrencies
Before we investigate particular forms of this novel trading movement, we need to understand what cryptocurrencies are. Crypto is a digital currency that can operate as a type of exchange; it functions under the practice of cryptography, which means using a third party to secure communication. In addition, Crypto works as entries on a database; these entries cannot be altered by anyone unless specific criteria are met.
Bitcoin was the pioneer of this process, being launched in 2008 by Satoshi Nakamoto. In 2021, automobile firm Tesla bought Bitcoin, but has now stopped accepting the currency as the fee for its cars, citing the use of fossil fuels for mining as a negative factor. Perhaps more than other forms of crypto, Bitcoin utilizes a larger network of computer systems to gather (or ‘mine’) the currency. The rise in Bitcoin’s popularity means that more computer networks have been required, which uses increased electricity and, therefore, more fossil fuels. Though most cryptocurrencies have increased in value over the last twelve months, Bitcoin has now started to face a decline. It lost 7.8% in the last week, but all is not lost. Renewed activity from long-term holders of the currency could be the beginning of another surge, meaning that this is possibly a good time to invest in Bitcoin.
The Bitcoin community has also struggled to find a particular purpose for their product. Aside from being ‘fun’ to trade with, spending it isn’t straightforward and is ordinarily limited to solely high-end products. Additionally, there are often transaction charges for the use of the currency, which can be a major hindrance to many people.
Dogecoin, on the other hand, was originally set up as a joke. However, in 2021, it has seen a rise in value of over 10,000%. It is currently trading at around $0.50, but there is significant strength behind the motion to push it up to $1. This has been helped massively by the backing from celebrities such as Snoop Dogg, who boosted the currency by 55% simply by tweeting a picture of Shiba Inu, the dog breed that represents the token for this form of crypto. However, this wild swing in value should be taken as a warning that Dogecoin is far from stable.
Ether is the using third cryptocurrency. This has seen a growth in quantity and usage over the last year, but this is starting to decline. The data shows a slowdown in new users of this type of crypto, which could concern major investors.
Changes during COVID-19 Pandemic
The quantity of both buying and selling crypto has increased during the pandemic. This is because a wider pool of potential traders has been able to gain access to the crypto markets through multiple platforms. In particular, the rise of crypto derivatives has been exponential and now has a greater quantity than that of spot buying and selling. As a result, buyers have put more than $200 billion into the digital property market over the last twelve months.
The monumental rise in the popularity of Bitcoin and Dogecoin, amongst others, has caused the crypto market to reach an unprecedented peak worth $2 trillion. This is an increase of $1.74 trillion during the last year. However, with this rise has come a huge increase in the transaction costs associated with cryptocurrencies - particularly Bitcoin - which has rendered them almost useless for small transactions.