For few days now, many crypto currencies seem to have lost significant gains made since the beginning of the year which has brought back fears of the 2017 burst, where the price of bitcoin crashed from around $20,000 to below $3,500.
However, experts have said that the decline that happened this time is different from the others because the market has stronger principles and is also coming into maturity on the back of investments institutions and growth in emerging market consumers.
This bitcoin bull run is not just from institutions,” Marcus Swanepoel, CEO/co-founder of Luno, a global crypto currency exchange, says in a tweet. “Our (retail) volumes in South Africa, Malaysia, Nigeria, and Indonesia all trebled over last month and at all-time highs. Emerging market consumers are voting with their money and they’re ready for a better financial system,” Swanepoel states.
When there are more investors in the market, it means more scrutiny into the dynamics of the infrastructure that energizes the market and how it is explored. questions have also risen about environmental impact, illicit activity, and regulation.
Bitcoin, which is the most valuable crypto asset, has been the most affected with the price falling by over 30 percent from as high as $58,000 it recorded last week to around $36,000. It recovered on Wednesday towards $40,000 and settled around $40,229 on Thursday morning.
According to Chainalysis, the end-of-day bitcoin price has declined by over 25 percent over seven days on four other occasions since the start of 2017. These were December 24, 2017, when the price fell from the $20,000 peak of the 2017 bull run; February 5, 2018, when the price fell below $10,000 as the bull run ended; November 25, 2018, when the price went to $4,000 as crypto winter set in, and Mid-March 2020, when the price declined to as low as $4,000 as financial markets reacted to COVID-19.
Ethereum price, which increased to an all-time high of $4,308 about seven days ago, dropped to $2,200 on Wednesday before recovering above $2,800.
While the price decline at 30 percent is high, the price level of both Bitcoin and Ethereum is still significantly high at over $40,000 and $2,000 respectively.
Way before Elon Musk and Tesla came along, there have been arguments over the consumption of electricity by bitcoin mining and the effects it has had on the environment and climate change.
It takes 10 minutes to mine one bitcoin. At 600 seconds (10 minutes), all things being equal, it will take 72,000GW (or 72 Terawatts) of power to mine a bitcoin using the average power usage provided by ASIC miners.
We all know that Tesla suspended Bitcoin payment and in their bid to explain why, they spilled that they were very worried about the increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.
A report by the BBC in February discovered that the bitcoin network consumes 121.4TWh of power per year, which means that it would be the 29th highest energy-consuming country in the world, above Argentina and below Norway.
Illicit activities is also one sore area that the critics of crypto currencies easily spotlight. In Nigeria where it’s authorities have taken a hard position on the market, the financial regulator accuses crypto currencies of funding terrorism and kidnappings while also funding insecurity in the largest country in Africa.
The irony is that way before crypto became a trending thing in this country, criminal networks have been causing damages and also emptying the bank accounts of wicked politicians.
But the level of anonymity that crypto currencies possess is attracting criminals. They have started demanding for their payment in crypto. A report on Ransomware 2021 by Chainalysis found that payments to attackers rose 337 percent from 2019 to 2020, when they reached over $400 million worth of crypto currency.
Ransomware is reportedly the fastest growing segment of cryptocurrency-related crime, with victim payments to attackers growing 311 percent to reach nearly $350 million worth of crypto currency.
“Attackers have shown no signs of slowing down in 2021, and have already taken in more than $81 million from victims so far this year. It’s important to keep in mind that these are low-end estimates, and that the true numbers are almost certainly higher,” the report released in May 2021, noted.
The fact that crypto is dipping and the situations that surround it has been a serious bother to its operators and they have been searching for answers.