Soaking up Bitcoin is a roller coaster ride of epic proportions for investors, and 2022 promises to offer more of the same.
Bitcoin and a host of other crypto prices on the market leader’s tail have generated big profits and agonizing losses over the past 12 months.
All of the reasons for gains and declines still affect the crypto market, so will the investor push push Bitcoin through the $ 100,000 cap or is the crypto in free fall?
Bitcoin was trading at $ 50,000 a month ago and even hit a record high of $ 69,000 in November.
Since then, the crypto’s trajectory has been downhill with a slight recovery after several cliff-top falls.
Indeed, Bitcoin fell back to its price last summer before climbing to $ 67,550.
Analysts argue that crypto is not immune to geopolitical forces. The US Federal Reserve’s tight monetary stance in favor of raising interest rates, coupled with political unrest in Kazahkstan, are the main drivers of the price drop.
Why is the unrest in Kazakhstan so important?
Well, since China banned crypto mining, miners have looked elsewhere for their base, with Kazakhstan and the United States as likely destinations. In Kazakhstan, the government has shut down the internet for periods, disrupting Bitcoin mining operations in the world’s second largest mining community.
Elsewhere, the impact of the Omicron COVID variant and the specter of runaway inflation wreaking havoc in major economies has held back much from investing.
It is no coincidence that the latest drop in value coincided with a massive sell-off by NASDAQ that followed the Federal Reserve’s report on a change of course for the economy.
The Bitcoin price crash is the most damaging for new investors who bought crypto when the market was high.
The declines wiped out around $ 15,000 from the face value of Bitcoin, which for new crypto investors represents gains made at the end of 2021.
Those who sat longer would have bought less and made a profit of over $ 15,000, but still made a small margin on the exchange of each coin.
Central bank digital currencies (CBDCs) are expected to take center stage in the crypto world.
CBDCs are not cryptocurrencies as they are controlled by a central bank instead of living without regulation on a peer-to-peer network blockchain.
Several countries are studying the introduction of a digital currency, including the United Kingdom.
The Bank of England says the exchange value of a digital book will always be tied to the value of paper money – so £ 10 from CBDC buys the same as £ 10 from paper money.
While Bitcoin is hosted on the internet and has no connection with paper currency, a UK digital currency is said to be attached to the British pound and interchangeable as a form of payment.
Tying a Britcoin to the British pound eliminates the price volatility that characterizes most cryptos.
The Central American Republic of El Salvador has already transitioned to a Bitcoin economy, with crypto being classified as legal tender. This exempts Bitcoin earnings from tax, while expats investing three Bitcoins in the country can apply for residency.
The next nation expected to make the crypto leap from Jamaica with the issuance of a CBDC within three months.
The advent of CBDCs depends on who controls a country’s economy. Cryptos have grown in popularity over the past decade because they are decentralized and unregulated. A CBDC is the exact opposite – centrally controlled and highly regulated.
Governments fear that cryptos will undermine their economies, so they will reap the benefits and shape them for their purposes.
For example, CDBCs are automated, faster than interbank transfers, and cheap. However, they also raise the question of whether we will need the banks if payments move to a CBDC.
Bitcoin is by far the most important player in the cryptocurrency market.
Launched over a decade ago, Bitcoin is the original crypto. Currently, a Bitcoin is worth $ 41,692 with a market cap of $ 785 billion. Collectively, the rest of the world’s roughly 3,000 cryptos are worth around $ 1,000 billion, giving Bitcoin over 75% market dominance.
The next biggest player is Etherreum, worth $ 3,183 a coin with a market cap of $ 376 billion, with Tether in third place, worth $ 0.99 and a market cap. stock market of 78 billion dollars.
CBDC is the abbreviation for central bank digital currency. A CBDC is a central bank-controlled online payment system that allows registered users to make digital payments.
A CBDC differs from cryptos like Bitcoin or Ether because a central bank oversees the system. Crypto has no central control and resides on a peer-to-peer network that uses multiple computers to verify transactions.
New Bitcoin is generated when miners solve complicated equations to free crypto from the blockchain – the underlying database that tracks and monitors crypto. Successful miners receive a Bitcoin reward for releasing the new blocks of coins.
Miners also charge a fee for confirming transactions on the Bitcoin network.
Yes, you can still invest, but you need to check crypto exchanges for their lowest trade values. Bitcoin can be split into much smaller slices, thus reducing the cost of investment, but not all exchanges will slice up Bitcoin as this increases their costs and reduces profits.
Who knows what the future holds for Bitcoin. It seems central banks want to make the most of cryptos to integrate with their digital payment systems. Of course, this presents some uncertainty for the future of Bitcoin, but there’s nothing stopping developers from taking the best chunks of a CBDC and making Bitcoin work better.
The majority of financial transactions are already electronic and cash spending is declining. If the Pound goes digital, most people probably won’t notice.
What does 2022 have in store for Bitcoin? As prices fall and central banks scramble to expand digital payments, the stage is set for a watershed moment for the world’s first cryptocurrency.
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