The precipitous downturn of the crypto market has brought cryptocurrencies back in the news. People wonder if this is the end of the crypto boom. The answer is ‘no’. Cryptocurrency is not really a currency. It is an asset that allows people to keep their money outside the formal financial system and make it accessible so that it can be used anywhere in the world. In today’s world, such an asset would be in great demand until some other asset innovation allows owners to achieve this objective in a more efficient way.
Price increases and decreases
Crypto assets like Bitcoin have been subject to wide fluctuations in their prices since their inception. The current downturn is not the first of its kind. There have been similar fluctuations in the past. The phenomenal rise in the price of Bitcoin in recent years has dwarfed the fluctuations in its price in the past. The popularity of Bitcoin is obvious from the price differentials with Ethereum and Litecoin. Most of the fluctuations in the price of Bitcoin are brought about by changes in the demand side as the asset’s supply moves very slowly given the enormous cost of mining an additional Bitcoin at this stage.
