In 2018, the capitalization of the cryptocurrency market, including the most popular digital currency, Bitcoin, fell by almost 80%.
When the creator of Bitcoin, under the pseudonym Satoshi Nakamoto, wrote his "white paper", he could hardly expect that his creation would become many times more expensive than gold. In the beginning, Bitcoins were mainly extracted and exchanged by programmers passionate about cryptography. Bitcoin was perceived more as something fun than a currency or a valuable asset.
Although the truth is that the idea of a decentralized currency, the issuance and processing of which is based on blockchain technology, eventually appealed to many financial speculators. After all, there is no single regulator, which means that the supply of currency and its value depend solely on the sentiment of the market, which, if desired, can be easily influenced. This is why the Bitcoin exchange rate, as well as that of many other cryptocurrencies, has increased twenty-fold in a year. If at the end of 2016 the Bitcoin rate was about $ 1,000, then in December 2017, just before the launch of the first Bitcoin futures in the world, for a cryptocrine they were ready to give $ 20,000.
A whole miners' industry has grown up, that is, those that directly process Bitcoin and other cryptocurrencies. China has practically become a monopolist on the market, probably because of its good industrial base for mining equipment production and low-cost electricity, which is much needed for the extraction and processing of cryptocurrency. China accounts for over 70% of Bitcoin's world production. In addition, the country proved to be the most advanced mining technology producer: Bitcoin Miner Bitcoin ASIC occupy three quarters of the world market.
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However, when the industry reached such a scale, the Chinese authorities worried. First, they understood that the price of cryptocurrency is rather conditional, depending on speculative sentiments. At the same time, the mining market, which has grown in China, has accumulated hundreds of millions of real dollars, which can easily be lost in the event of volatility. Not to mention the fact that they were no longer the speculators who started investing in cryptocurrencies, but ordinary citizens.
There are many stories in the Chinese media about how people sold apartments to invest in Bitcoin, promised money for their studies, even grandmothers tried to convert their meager pension savings into cryptocurrency. This could eventually turn into serious social upheavals. And it is then that China introduced a total ban on the circulation of cryptocurrencies in the country, including the numerous exchanges of cryptocurrencies and the main placement of ICO coins. In January of the outgoing year, the Internet Finance Risk Management Management Group of the Chinese Central Bank issued a provision for miners who should gradually gradually abandon their activities, said Zhang Ning, expert at the Institute of Economic and Financial Strategy of the Chinese Academy of Social Sciences (CASS) of the People's Republic of China , in an interview with Sputnik.
"The Chinese authorities will take rather stringent measures: firstly, in order to ensure a normal and uninterrupted supply of electricity to the population and to industry, it is necessary to limit the consumption of electricity by the miners, secondly, cryptocurrencies and Bitcoin in particular, threaten the state monopoly on the monetary question, moreover, in the last two or three years, the authorities of the country have pursued a policy of controlling the outflow of capital in order to maintain the stability of the yuan and the cryptocurrency denies Regulators' efforts: capital is withdrawn from the country with the help of it, including criminal money, thus becoming a way to circumvent financial control ".
In 2018, the rate of Bitcoin and other cryptocurrencies began to decline. Analysts have often attributed it to the prohibition of the Chinese authorities. For example, when a player who occupies two thirds of the market leaves, he naturally puts the entire sphere under pressure. Naturally, restrictive measures could have an impact. But they can be bypassed. Cryptocurrency exchanges have started to move en masse to other jurisdictions: Japan, Singapore, South Korea and Hong Kong. Participants in the cryptocurrency market who were unable to register in the new exchanges on time made P2P transactions through the most popular instant messaging programs. Finally, miners have started to find other places with cheap electricity and a cold climate, favorable to powerful computers that need constant cooling – in Russian Transbaikalia, Siberia or Canada.
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Much more often investors have been frightened by frequent failures in the cryptocurrency trade. Once they were subjected to hacker attacks, with the data of the participants transmitted to third parties. On the other hand, cryptocurrency portfolios were cracked. Finally, the suspension of the operations of the exchanges themselves led to significant losses. The most serious incident occurred last autumn on the OKEx Chinese exchange, where Bitcoin futures are traded. During the sharp fall in the price of Bitcoin, the exchange suddenly "crashed" – the participants were "thrown out" by personal accounts and could not carry out any operation.
However, as the rate was decreasing, margin calls were made. Therefore, the positions of many investors have been forcibly closed and have not been able to influence the process. A huge number of people have lost their only savings. Indignant investors have almost taken over the company's office, so the founder of OKEx, Xu Xing, had to hide in a police station.
Finally, the lack of consensus in the miners and developers community does not inspire investors. The "Forks" or Bitcoin divisions have occurred more than once. A branch subsequently developed by the original Bitcoin – Bitcoin Cash. So this branch is also divided. It can not be said that it was specifically one of these factors that had a decisive impact on the speed of Bitcoin. Most likely, a combination of all these factors pushed the cryptocurrency market down.
Bitcoin will enter the new year with only 20% of its value compared to the same period of the previous year. The hype has passed and now only professional players remain. In this context, countries are increasingly interested in the use of the blockchain to translate national currencies into numbers and gain unprecedented control over the financial system. Venezuela has tried to improve the economy of the national cryptocurrency, El Petro, which is backed by oil assets.
On March 21, the initial money supply of the digital currency (ICO) began in Venezuela. Initially, it was assumed that the cost of El Petro would be equivalent to a barrel of Venezuelan oil. The authorities had hoped that the cryptocurrency would help stabilize the soberano bolivar. They even began to appoint pensions and social benefits for citizens in cryptocurrency and offered other countries to pay for oil in El Petro. But it was later discovered that the price of cryptocurrency was determined by President Nicolas Maduro. The price of El Petro has grown over the course of the year. For this reason, the bolivar has devalued even more and there is no talk of economic stabilization.
China has also announced the intention to launch its own national cryptocurrency. The vice-governor of the People's Bank of China, Fan Yifei, noted that, initially, the digital yuan will replace only the monetary aggregate M0 (cash in circulation). The use of cryptocurrency in investment activities will be prohibited. The introduction of digital money and the blockchain will allow the Chinese authorities to significantly reduce the volume of the shadow economy. Based on the statements of the vice-governor of the Chinese Central Bank, it follows that the transactions must not be anonymous.
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Therefore, the crypto-yuan will increase the transparency of transactions ("black" accounting will no longer be possible). Secondly, the cost of maintaining a digital money system is much lower for the regulator than the cost of issuing and disposing of paper money. Thirdly, using cryptocurrency, cross-border money transfers could be made much faster and cheaper.
So far, these are only plans for the future. However, a paradoxical tendency can already be traced. The cryptocurrency based on the blockchain was conceived by libertarians as a response to the global financial crisis of 2008, for which, they thought, the central banks of the major countries and the largest financial companies in the world were to blame. The idea was simple: to invent money where nobody would have a monopoly and that would be regulated only by the free market. Now the practice seems to show that without a regulator, chaos occurs very often. What is even more surprising, it turns out, is that the libertarian blockchain is perfect for absolute financial control.
The opinions and opinions expressed by the rapporteur do not necessarily reflect those of Sputnik.