The Cryptocurrencies: Bubble For Puncturing Or Currency Of The Future?

Virtual Currencies Have Lost More Than Half Their Value Since December 2017

Experts point out that the price variation is explained by speculative interest

Cryptocurrency and volatility tend to be synonymous. Bitcoin, the best-known cryptocurrency, has seen its value rise from $ 19,200 in December 2017 to $ 6,500 today, representing a 66% drop. Other virtual currencies, such as ethereum , the second highest- priced digital currency, touched its historical peak in January of this year at $ 1,380, but currently stands at 220.

A depreciation that goes beyond these examples and that It affects the entire sector. According to calculations by Coinmarketcap , crypto currencies reached a value close to 800,000 billion dollars in January, a figure that has been reduced to 218,000 billion in ten months.

“It’s a natural correction, all the historical corrections have been like that, everything that goes up a lot, very fast, also goes down a lot,” says Alex Preukschat, coordinator of Blockchain Spain . Preukschat argues that just as it happens in the financial system, the desire to want to speculate with investment assets with the intention of obtaining profits will always be present. You can get more information on Bitcoin Cash ABC website.

A statement that UBS puts in figures. According to the Swiss bank, the oscillation of digital currencies is due 70% to speculation. The entity emphasizes with all that the bitcoin is still in what it defines as “childhood” and that it is very difficult to determine whether it satisfies the definition of a valid and sustainable asset as a means of payment, to the use of a traditional currency, or if it is an alternative kind of financial asset, with the ups and downs inherent in the stock market. For now, the essence of cryptocurrency, as deregulated assets and not linked to any central bank that is responsible for supporting them, are exposed to any fluctuation in the price caused by demand, which in some cases is abrupt, and a limited supply by definition.

Manuel Pingarrón, director of consultancy Simon-Kucher , introduces the concept of “fashion” to refer to the value of cryptocurrencies. And it maintains that its depreciation does not mean that it stops operating with this type of currencies, nor that they stop being “fashionable”. Further, the expert says it is “risky” to compare the bitcoin with bubbles such as real estate or dotcom.

“The growth of virtual currencies is simply due to a question of supply and demand: supply is scarce, since cryptocurrencies are limited, while demand is high, therefore, the asset is revalued,” explains Pingarrón. The expert adds that investment in virtual currency will continue to increase in the coming years, although they continue to lose value.

One of the biggest criticisms criptodivisas receives from analysts is their security system. The Spanish firm Consilio , dedicated to financial advice, believes that “perhaps the biggest challenge for the proliferation of cryptocurrencies is that there are other alternative and safe mechanisms for the transfer of money instantly.” Along these lines, a study by Barclays recently mentioned that the use of digital currencies is aimed at countries in which consumers and companies show great mistrust in the currencies issued by their own governments.

“The future of cryptocurrencies is uncertain, but every day is less,” says Pingarrón and recalls that large banks are already investigating and working with this type of assets.

The future will reveal if the digital currencies become a currency at the same time as the traditional currencies or if, in the event that they occupy a marginal role in finance or even disappear, an asset that lived its moment of splendor. You can get more information on Bitcoin Cash ABC website.