23 January 2021
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Bitcoin fell by more than $11,000 on Monday. The latest slide came only two days after the world’s most sought-after cryptocurrency hit its peak, triggering warnings from the UK’s financial market watchdog that consumers could lose all their money.

“The volatile nature of cryptoassets was highlighted again on Monday as bitcoin dropped 28% from Friday’s record high of $42,000, having doubled its value in less than a month,” The Guardian said in a report.

“As the popularity of cryptocurrencies grows, the Financial Conduct Authority urged consumers to understand what they were investing in and the financial risks involved, given they were unlikely to be protected by UK schemes that help investors reclaim cash when companies go bust,” it added.

The currency has since recovered, trading at $36,543 at 12:33pm on Wednesday, but has once again brought under discussion its highly volatile and speculative nature. “Some crypto investment firms may be overstating potential payouts, or understating the risks,” the FCA said.

Bitcoin was the first cryptocurrency to ever be launched. A person by the name of Satoshi Nakamoto introduced it in 2008 without revealing his identity. Since then many other cryptocurrencies, together known as AltCoin, have been launched, but Bitcoin remains the most popular and most valued of all.

A cryptocurrency is different from conventional digital currencies because it bypasses intermediaries, usually a bank, and enables direct peer-to-peer payments. Nakamoto launched it in the wake of financial crisis to give people control over their money and exclude banks or governments from the process. It works on blockchain technology, a decentralized model of ledger. That is, no central bank or government can place any limit on its production or transfers.

Cryptocurrencies give full control to senders and receivers for managing their money. It is instant and doesn’t identify either party. Proponents of cryptocurrency call it a breakthrough technology, one that will change the way financial systems work. Critics say it is a darling of criminals, who can use it for crimes like drug trafficking, money laundering and terrorist financing because of the anonymity it provides to senders and receivers. The Dark Web is a case in point where criminals demand payments in Bitcoins.

“The latest bout of roller-coaster volatility recalls past boom and bust cycles including the 2017 bubble, and has investors debating whether this is a healthy correction or the end of the latest bull run for cryptocurrencies,” Bloomberg reported, referring to a 5% recovery within a day.

Bitcoin has made many people rich in no time, but many have lost massive amounts of money because of its speculative and volatile nature. Since 2013, when it was trading at $100, Bitcoin has given extraordinary return to those who held on to it with a long-term view, but that growth has been a roller-coaster ride with frequent slides that made people lose all of their savings.

The latest rally saw it double its value in a month, hitting an all-time high of $42,000 on Friday. Who caused that rally is difficult to pinpoint and one of the many crypto mysteries, Bloomberg said, adding, “Bitcoin funds, momentum chasers, billionaires, day traders, companies and even institutional investors have all been cited.”

Abdul Gh Lone

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