On Friday, June 25, 2021, the number one news trending in Google was cryptocurrency. Ethereum, Dogecoin, BNB, XRP – sounding like names of planets, straight out of science fiction – were causing quite a stir, if not panic. At the centre of it all was Bitcoin. Bitcurious? The 52-week high of Bitcoin had been $64,863. At 9:06 am on Friday, June 25, 2021, it plummeted down to $33,100.54. Experts project that things are going get worse.
To understand what is going on, we need to understand the basics of Bitcoin. Bitcoin allows for payments to be made between people without the interference of banks. A Bitcoin wallet facilitates transactions that get stored in lumps called “a blockchain”. Bitcoin falls under the umbrella of “Cryptocurrency”, whereby electronic tokens represent standard currencies. As of 9:06 am on Friday, June 25, 2021, 1 Bitcoin = $33,100.54. Bitcoin.org lists the advantages: 1) Simple scan-and-pay via mobile device without the hassle of swiping a card, remembering a PIN or signing documents. 2) Protection against fraud. 3) 24/7 availability. 4) International payments – no 3-business day wait, no extra fees and no limit on transfer amount. 5) Fees are not determined by the amount transferred (ex. sending 100,000 bitcoins is the same fee as sending 1 bitcoin). 6) No credit card numbers involved, therefore no risk of identity theft. There are over 4,000 cryptocurrencies, with Bitcoin topping the list and Ethereum, Tether, Binance and Cardano, rounding out the top 5.
As much as this sounds alluring, especially since many of us are forced to live in the virtual world amidst lockdowns and online shopping is very much part of The New Normal, cryptocurrency carries its own risk. The CNBC headline of June 22, 2021 is startling: “‘Up until yesterday, I had been a millionaire’: This 33-year-old dogecoin investor refuses to sell despite losing over $167,000 in one day. And yet, one year ago, the price for Dogecoin was up 11,000%. Analysts are attributing the fall of Bitcoin to China shutting down cryptocurrency operations to offset financial risks. The UK has outlawed Binance and Ontario even made it to international news on BBC on June 28, 2021 when it followed suit.
Another consideration is the amount of energy consumed in Bitcoin mining. Networks of computers are incessantly trying to solve complex computations to keep up with the public ledger of transactions. Coal and oil are used to power the mining rigs, as well as necessary cooling fans. This all takes up energy. In fact, to get Bitcoin up and running, it requires approximately a quarter of Canada’s electricity consumed in one year.
Bitcoin is like Bigfoot. It is lurking in the deep forest of illicit activity. When it gets called out by billionaires like Elon Musk. it unleashes its wrath – 6 times the volatility of gold. And it leaves a huge carbon footprint.
Image by anncapictures from Pixabay
