Bitcoin was the first mainstream cryptocurrency, but its high price has ensured it remains popular, even as the technology behind it became more outdated and inefficient. Now, Bitcoin might finally in a death spiral.
One Bitcoin is still worth around $17,000, as of when this article was published, but that’s a significant drop from where the currency was valued a year ago. The currency was at an all-time high of around $68,000 in November 2021, so if you bought some then, you would have lost over 70% of your money. Bitcoin’s value is based entirely on its algorithm of artificial scarcity (mining Bitcoin is designed to be more difficult as time goes on) and the perception of its worth to other people — the latter has certainly been damaged over the past year.
Since that all-time high in November, the United Kingdom ordered all Bitcoin ATMs to be shut down, the Bexplus crypto exchange shut down with only 24 hours of warning, car manufacturer Tesla sold most of its Bitcoin (at one point you could buy Tesla cars with the currency), and China has conducted repeated crackdowns of cryptocurrency mining operations in its country. That’s ignoring the various hacks, “rug pulls,” and other incidents that damaged trust in the wider cryptocurrency world, including Bitcoin.
Bitcoin has taken another plunge in the past week, along with some other cryptocurrencies, partially due to the collapse of FTX, a platform for exchanging cryptocurrency. FTX had a partnership with GameStop and an advertisement during the last Super Bowl, but a report on November 2 indicated much of the company’s worth was wrapped up in a trading company (Alameda Research) owned by the CEO of FTX, Sam Bankman-Fried. That led to Binance, another trading company, deciding to sell their share of FTX’s crypto token, which quickly turned into Binance attempting to acquire the entirety of FTX to keep its investment stable. The next day, the deal was off, trading platform BlockFi suspended customer withdraws because of its connections to the companies, the Bahamas froze all FTX assets, and now FTX has filed for bankruptcy. The situation is so bad that it’s reigniting calls to regulate the crypto industry like banks.
Much like the collapse of the Luna and terraUSD cryptocurrencies earlier this year, the chain of liquidity problems caused ripple effects throughout the entire trading ecosystem, as one company realized the other didn’t have as much money as they claimed. Unsurprisingly, that impacts the value of many cryptocurrencies (Ethereum is also down 73% in the past year), but it’s hitting Bitcoin especially hard.
Bitcoin is unlikely to completely fall apart anytime soon, since there are still many people that see value in the currency, but it’s difficult to see the currency rising back to its previous highs. That’s probably a good thing, though — Bitcoin is one of the worst cryptocurrencies in terms of energy efficiency, and Bitcoin mining plants often use coal and other forms of non-renewable energy. With climate change on the rise, and other coins switching to a better (but still far from perfect) proof-of-stake model, Bitcoin should be left in the past.
