Bitcoin ‘not very useful today’ as expert questions what cryptocurrency ‘success’ is | City & Business | Finance
Elon Musk announces suspension of Bitcoin Tesla purchases
Bitcoin’s value rose by around 5.6 percent to $49,338 (£34,991), which is a price rise of $2,629 (£1,864) on its previous close. The fluctuating cryptocurrency has experienced a turbulent year, but its current value is nearly 78 percent up from the year’s low of $27,734 (£19,669), which was posted on January 4. Its value now, however, is also 24 percent down on its highest price of $64,895 (£46,024) from April 14.
But despite a resurgence, those involved in the world of crypto were given a blow after Tesla CEO Elon Musk confirmed his business would no longer accept Bitcoin for car purchases.
Mr Musk said the firm was “concerned about the rapidly increasing use of fossil fuels for Bitcoin mining”, that while the cryptocurrency is “a good idea on many levels” it “cannot come at great cost to the environment”.
He added: “Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy.
“We are also looking at other cryptocurrencies that use [less than] one percent of Bitcoin’s energy/transaction.”
Bitcoin ‘not very useful today’ as expert questions what cryptocurrency ‘success’ is
Bitcoin is known as a fluctuating cryptocurrency
With the cryptocurrency often described by commentators and finance experts as a risky investment proposal, Jon Danielsson – director of the Systemic Risk Centre in London’s School of Economics – questioned what success would actually be for Bitcoin, and those hoping to make money from it.
Writing for VoxEU in February, he said: “The only reason all the Bitcoins are worth a trillion dollars is the expectation of success, as they are not very useful today.
“Cryptocurrencies must provide some valuable service if they are to justify their high valuation, otherwise holding Bitcoin is just like collecting stamps or beanie babies – a minority activity that does not justify the current $51,000 (£36,170) price.
“But what is the valuable service that makes Bitcoin successful?
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“To the vast majority of Bitcoin investors, success means its price continues to rise. But if that is all there is to it, someday a little boy will yell, ‘the Emperor has no clothes’, and the price will come crashing down.”
Despite warnings made about the currency’s future, including by Coinbase chief executive Brian Armstrong, others say the sky’s the limit for the cryptocurrency, with Ian Balina, the chief executive of Token Metrics, claiming in December “we’re now officially in uncharted territory”.
Mr Balina’s comments came in early February, after the currency had risen from $19,000 (£13,800) to $24,000 (£17,400) in a matter of days.
JP Thieriot, chief executive of California-based bitcoin and cryptocurrency exchange Uphold, also welcomed its growth.
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According to Forbes, he said: “I think low $20,000 (£14,500) is just the beginning.
“This upward trend is likely to continue for months to come, as investors continue buying into consumer-style digital platforms that offer greater access to these markets than traditional financial service providers do.”
But Mr Armstrong remained cautious, arguing he “cannot emphasise enough how important it is to understand that investing in crypto is not without risk”.
In a Coinbase blog, the expert said: “Crypto can be a volatile asset class. Often more so than the types of traditional financial instruments that most investors are used to.
“For example, this means that the market can move in either direction much faster than equity markets.
“Like all asset classes, crypto markets will rise and fall over time. We’ll occasionally see strong market rallies where prices will rise quickly and aggressively.
“While we’re always excited to see increased interest in crypto, it’s also important to point out that this is not only a time of high volumes, but also price volatility.”
Bitcoin’s impact on the environment is something that has upset critics
Britain’s Financial Conduct Authority (FCA) warned investors of the risks that come with Bitcoin following the recent slump.
They said: “If consumers invest, they should be prepared to lose all their money.
“Some investments advertising high returns from crypto assets may not be subject to regulation beyond anti-money laundering.
“Significant price volatility, combined with the difficulties valuing [Bitcoin] reliably, place consumers at a high risk of losses.”
Express.co.uk does not give financial advice. The journalists who worked on this article do not own Bitcoin.