Listen to this article now
Bitcoin is the king of cryptocurrencies. Whether it is a major player or not is yet to be seen. One thing is certain, it is growing in popularity, and non-experts are starting to see it as a viable investment option.
Whether you are a newbie or an experienced investor, scams are a part of every market. One of the most famous scams in the crypto space is the get-rich-quick-scheme that is called Bitcoin. The biggest bitcoin scam of all time is called the Silk Road, a dark web market that sold illegal drugs in exchange for bitcoin. The majority of bitcoin investors are rightly concerned that a market like Silk Road would be a nightmare to regulate, and the recent arrest of the site’s founder highlights the risks of investing in a digital currency that is so volatile.
Since the beginning of the year, Bitcoins have lost more than half their value. The cryptocurrency, which started the year at more than $55,000 per coin, tumbled to a low of around $32,000 at one point, before recovering somewhat. Now, the price has settled in at around $38,000. And while the initial price drop was blamed on concerns about the US Securities and Exchange Commission (SEC) considering the creation of a Bitcoin exchange-traded fund (ETF), there’s some speculation that the most recent slide is a result of China cracking down on the cryptocurrency.
All eyes are on bitcoin (BTC), the largest cryptocurrency, which after going through correction again broke the $40,000 mark on June 14. Not surprisingly, the price hike came shortly after Tesla CEO Elon Musk tweeted that the electric car company may accept payments in BTC as more and more miners confirm their green energy initiatives. Although Musk’s tweet has driven up the price of bitcoin, some industry experts believe that bitcoin is not a cryptocurrency that should be used for loans.
In an exclusive interview at Bitcoin 2021 in Miami, Caitlin Long, founder, and CEO of Avanti Financial told Cointelegraph that, unlike other cryptocurrencies, creditworthiness is more important than leverage and liquidity when it comes to bitcoin: If you get into bitcoin and you start losing money, I think it’s a very valuable learning experience to learn what bitcoin is. There are a lot of new people in the industry now who are experiencing these lessons, and I hope people will learn from them. Especially in this bull market, there is so much leverage added to the system. Those of us who have been around for a long time learned this lesson long ago: bitcoin cannot be mined.
Regulatory Pressure on Bitcoin and Stablecoin
Long not only said that bitcoin should not be used as leverage but also said that new regulations on bitcoin are coming out of Washington D.C., which she said were decided by other government agencies. It was Ray Dalio who said the biggest threat to bitcoin is its success because that means regulators will fight back, Long said. That may be the case, but Long noted that regulations won’t ban cryptocurrencies or bitcoin, as long as users follow the rules. She said: The bottom line is: If you pay your taxes, follow the rules, and don’t take shortcuts, you’ll be fine. Those who try to commit crimes, or cheat consumers, or don’t pay taxes, or don’t follow the law, it’s not going to work for those people.
Long also said regulating stable currencies is a priority for lawmakers. In particular, it ensures that stablecoins do not pose liquidity risks to the US dollar payment system. To put this in perspective, Long mentioned the accidental hard fork that occurred within hours on Ethereum (ETH) last November: At the time, I wondered what would happen if all stable Ethereum ERC20 coins had to be redeemed within minutes because they had to be burned in one fork and reissued in another? This is not the risk that the traditional financial system was thinking about. In addition, Long commented on the risks of stablecoins in May, warning that the entire stablecoin market has the potential to collapse even more tokens if the credit market corrects.
A blockchain is a decentralized and public ledger of all bitcoin transactions that have ever been executed. It is commonly referred to as a “ledger,” but more accurately, a blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. A blockchain can consist of many blocks, which contain multiple transactions of value. These transactions are grouped into “transactions” and verified through a process called “mining.”.