Bitcoin hit $7,977 again on Friday, down 10 percent from Wednesday. It has lost 80 percent of its value from a November peak, when it was above $20,000. Most observers are baffled about what’s going on, but we consider the following the best and most reasonable explanations for the manic rollercoaster ride. They include:
The Energy Epidemic: “Bitcoin has come under intense price pressure because a widespread plunge in energy prices has driven the costs of storing computing power for transactions up. That drives up the price of bitcoin and other virtual currencies by making them considerably more attractive to investors,” Quartz reports.
There’s also much speculation that the “junk” bitcoin chips that allow it to function as a genuine currency – and the not-so-junk ones that allow users to recoup some of their funds – are on the brink of collapse. Quartz’ Ian Bremmer speculates that Microsoft will return to the market for blockchain cryptocurrency, and that Goldman Sachs and former hedge fund managers will likely form a blockchain investment fund.
Economic Recovery: In the case of the tech bubble of the late-90s, there was an efflorescence of speculative financial activity. That type of bubble tends to be more durable, argues Bremmer. Technological advances are helping drive the Chinese economy, and people continue to go out to the movies. Meanwhile, there is a widespread belief that things are at last improving economically, as shown by the relative stability of the stock market, improving earnings, and the rise of the dollar.
Employment Downturn: Part of the reason why the stock market is still setting records is the “all boats rise together” theory, says Bremmer. It works because people are concerned about losing their job, so they collectively reinvest their savings in the stock market. The other reason for the downward spiral is that stocks are a benchmark for wealth in the economy. Stock prices decline at times when people get desperate to maintain their homes and to avoid the idea of losing their jobs, says Bremmer.
The Skijoring Controversy: One reason bitcoin might be suffering is because of anxiety over the erosion of online anonymity. For instance, there is the explosion of activity on VPN sites, which allow users to mask their locations in order to access websites and communicate more freely. Other issues have to do with the popularity of anonymous messaging apps. Bremmer writes that the decline of the crypto-currency is in part “because many in the private security community have begun to take seriously their fears that bitcoin will become too widely used for illegal activities, particularly by users of services like Tor, which are known to hide users’ identities.”
Coronavirus: There’s new concern that the current wave of emerging-circumstances diseases may be tied to the spread of the deadly fast-moving respiratory virus known as the H3N2N2 in western countries, according to The New York Times. In Sweden, 64 people have died as a result of the disease, with officials considering it a global epidemic. That news has created a rise in interest in vaccinations and vaccines for travelers, the Times reports.
Hipsters to Leave London: Tens of thousands of Londoners are expected to leave the city, primarily young millennials, in search of jobs and affordable housing, according to a report from City Lab. “Many of the people who have moved to London in the past two decades — particularly those who came after the mid-1990s to work in technology — will be coming home,” it says. “The rewards in British tech will increase over time, but the challenge is to match it with housing, jobs and educational opportunities that will allow them to still live here.”
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