Is cryptocurrency going up, down or out?
With a single tweet from Elon Musk on cryptocurrency, the value of Dogecoin rocketed 50% on news Musk had dubbed it "the people's crypto". This year the currency has risen by more than 800%, taking it from a mid January value of $0.01 to over $0.08 by 11th February, then back to $0.05 (500%), a week later. Created originally as a bit of a joke in 2013, maybe it's now time to take Dogecoin's existence seriously. Is now the time to be taking other cryptocurrencies seriously? There are now a number of other cryptocurrencies being talked about on social media and this interest has seen their values soar in the past month. So what's happening and why the sudden interest in cryptocurrency?
With 128 billion Dogecoins in circulation, worth a total of $7 billion, Dogecoin, like any cryptocurrency, has no intrinsic value and no ability to generate an income and is susceptible to market conditions and can crash as fast as they rise. Therefore these are hard to value and are reliant for stability on market confidence and are vulnerable to tips from backers or sudden panics. That is apparent by Dogecoin's majestic rise by 800% early February and back to just 500% a week later. Early February, saw Bitcoin up almost 200%, also by a tweet from Musk, who had admitted that he would accept Bitcoin as a medium of exchange and that customers could pay for a Tesla in Bitcoins, or the rate that Bitcoin is rising, currently $55,000 from $29,000 at the start of the year, maybe just one Bitcoin could secure a car purchase if the price rises further, who knows. So the start of 2021 has seen a lot of real interest in cryptocurrency, with Bitcoin, Dogecoin and Litecoin all being talked about, resulting in their values rising sharply.
So why the sudden interest? Earlier in the year we saw the value of GameStop, a US video game and consumer electronics retailer chain and the world's largest video game retailer with over 5,500 stores, shoot up in value from $18.84 at the start of the year to $347.50 by the end of January. That rise was stopped in its tracks by the trading app Robinhood, who banned purchases of GameStop on the app. Suddenly share trading was seen by many younger investors (who played the video games sold by GameStop), as an easy way to 'apparently' make fast profits, trading in relatively unknown stocks, but stocks they knew about, as gamers. The GameStop price has since then fallen back to $40.60. With the sudden interest in shares that can move quickly, other stocks such as cryptocurrencies have also been a talking point with positive mentions by Elon Musk and as a result, investors have been keen to invest in them also, but these currencies are now in very short supply, as investors are reluctant to sell or trade them, thus keeping the price high, whereas just a year ago, most investors would have been very cautious as a purchase, as they were regarded as very unpredictable to value with very rocky values.
As these cryptocurrencies have no physical shape or form, unlike an actual currency you can hold in your hand in the form of notes and coins, or gold and silver, cryptocurrencies only exist as digital trade options. We saw the price of Bitcoin fall by 14% on Monday 22rd trading, having reached a peak of $58,012 on the 21st February and now sitting at $48,635 on the 23rd.
Yes, cryptocurrency maybe the future of money exchange, but for the moment it is too volatile to comfortably invest in. Those holding currently Bitcoins and other cryptocurrencies would have paid a considerably less than they are currently trading, so are just sitting on them. With Bitcoin surging 500% in the past 12 months with a recommendation by Musk, bringing the total value of Bitcoin in circulation to over $1 trillion. Ethereum, the second largest cryptocurrency, also broke the $2,000 barrier for the first time, giving that a total value of $266 billion.
However, Musk has also recently tweeted, warning investors about the price of cryptocurrencies, such as Bitcoin and Ethereum, being too high, in a discussion about money. "Money is just data that allows us to avoid the inconvenience of barter. That data, like all data, is subject to latency and error. The system will evolve to that which minimises both. That said Bitcoin and Ethereum do seem high". Musk was replying to the gold investor and Bitcoin septic Peter Schiff.