Is cryptocurrency’s nosedive the beginning of its collapse?
Bitcoin has plunged more than 52 percent this year, as it presently trades below $21,000. According to CoinDesk data, Bitcoin lost its bounce to drop below $20,000 before regaining ground.
It is worth noting that the token was priced at $0 when it was founded by an individual pseudonymously known as Satoshi Nakamoto in 2008 and started trading in 2009.
However, it is believed that greed, hunger for quick profits and speculation were among the main reasons behind the rise in its prices and volatility.
Moreover, one of the reasons contributing to the fame of cryptocurrency in general and Bitcoin in specific is that it is a decentralized currency that allows peer-to-peer transfer over network nodes through cryptography and gets recorded on a public distributed ledger called the blockchain.
This feature has contributed greatly to reducing the costs associated with money remittances since it is done without the need for financial intermediaries such as banks.
However, on the other hand, such a feature has significantly contributed to concealing the financial operations as the payments are difficult to be traced. Thus, Bitcoin has been criticized for its use in illegal transactions, such as moneylending operations.
Also, cryptocurrency is criticized for using a large amount of electricity for mining and its price volatility. Therefore, some financial experts have described it as theft from exchanges and a speculative bubble.
Saudi financial authorities such as the Saudi Central Bank, the Capital Market Authority and the Permanent Committee for Awareness and Warning against the Activity of Trading in Securities in the Unlicensed Foreign Exchange have repeatedly warned against faked investments due to their hazardous consequences.
The Saudi Ministry of Finance has warned against dealing or investing in virtual currencies, including cryptocurrencies, as none of the legal entities in the Kingdom recognize them.
The MOF said in its statement that any use of the KSA name, national currency, or emblem by any entity for virtual or digital currencies marketing would be subject to legal actions by the competent authorities in the Kingdom.
Undoubtedly, the warring of Saudi authorities, including Saudi banks, regarding investing in Cryptocurrencies is thoughtful and highly appreciated because such currencies are outside the scope of the regulatory framework such as central banks.
Additionally, it is not traded by any of the financial institutions in the Kingdom, and they have been associated with fraudulent and illegitimate financial activities.
Lastly, they are known for their high-investment risks related to frequent price volatility, which could cause considerable losses to investors.
I believe that the sharp decline in the price of cryptocurrencies, including Bitcoin, is not to be considered a correction but rather a collapse.
This opinion is based on the fact that cryptocurrencies are not linked to any economic or political factors that may affect their values since no authority regulates them. Moreover, they do not even possess real money characteristics, such as value preservation.