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The crypto crash of 2018

Devuni Goonewardene

Colombo (News 1st)

Is Bitcoin money?

In a way, yes, though it’s not necessarily a useful form of it. It’s possible to buy or sell some things with Bitcoin but very few people do. Extreme volatility is perhaps the biggest argument against treating cryptocurrencies. The hallmark of a reliable currency is that it provides a stable store of value. You wouldn’t want to spend Bitcoin on groceries today if you thought its value might soar tomorrow, or take your salary in Bitcoin if you thought it might plunge.

So what is it?

Born out of the bitterness that followed the 2008 financial crisis, Bitcoin and its imitators aren’t bills or coins printed or policed by a government or bank. They’re electronic assets created and monitored by a community of users acting in a decentralized way, following protocols set down by the person or persons who dreamed them up.

The “crypto” in the name refers to the encryption techniques used by so-called Bitcoin miners. And all the new currencies revolve around what’s seen as Bitcoin’s real innovation — blockchain, a publicly visible, largely anonymous online ledger that records the calculations miners perform to verify transactions without the need for a central authority.

The Great crypto crash of ’18

Bitcoin and other major cryptocurrencies have crashed in a sudden and dramatic market collapse. The crypto market has lost around $640 billion of value by the crash.

After weeks of steady gains, bitcoin dropped in price by more than $300 in the space of an hour on Wednesday (September 05) morning, with ethereum, ripple and bitcoin cash all following its lead. By Thursday (September 06) morning, bitcoin had fallen $1,000 in just 24 hours.

The reason for the sudden price crash was not immediately obvious, though some analysts have said panic selling could contribute to bitcoin’s fall in value.

Other factors potentially contributing to the crash include a report that Goldman Sachs is dropping plans for a cryptocurrency trading desk.

While Goldman Sachs denied the report made about them backing away from plans to open a cryptocurrency trading desk, bitcoin experienced a bloodbath by falling around 12 per cent, the hardest hit by the market shift has been ethereum, ripple, bitcoin cash and EOS, which all dropped by around 20 per cent.

Bitcoin hit a one-month high on Tuesday (September 04), leading some experts to suggest that more price gains can be expected.

One silver lining of the crypto slump is that ramifications for the global economy are likely to be minimal. While the market has lost more than $640 billion of value since peaking in January, that’s a far cry from the trillions erased from Nasdaq Composite stocks during the dot-com bust in the 2000’s.

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