The world’s eyes are on the cryptocurrency market after the emotional rollercoaster of recent weeks, when Bitcoin, the largest cryptocurrency in the world, lost almost a third of its value.
Some market experts say last week’s crash could be just a little taste of what’s to come, labelling the crypto market a “bubble” that could pop at any time. Others, however, note that despite the volatility, cryptocurrencies are here to stay and will become the future of finance.
Among them is Lexy Prodromos, Executive Director at the Chicago Blockchain Center, a non-profit public/private initiative dedicated to blockchain advocacy, education and community innovation.
The Greek-American executive says that price volatility has been a part of Bitcoin since the beginning.
“It’s completely market determined. It’s a global network that’s not owned or operated by a single company or country or government. So price volatility is definitely a part of owning Bitcoin,” Prodromos tells Greek Reporter.
The sector as a whole lost almost $1 trillion in the biggest one-day drop since March 2020 last week, but as the price of Bitcoin has started to bounce back, Prodromos points the finger at regulatory announcements coming out of China.
“For the third time in several years, they announced that they were banning Bitcoin, but people have been seeing over the past few days that they’re still able to buy and sell Bitcoin,” she says.
And then there is Elon Musk, who said Tesla would no longer accept bitcoin as payment; that affected the price as well. Whether it’s going on “Saturday Night Live” and joking that dogecoin is a “hustle” or saying that bitcoin mining may not be great for the environment, Musk’s comments have cryptocurrency backers wishing he would stop tweeting and focus more on building cars instead.
“These environmental concerns that Elon was speaking about have been somewhat well-known in the cryptocurrency space and with Bitcoin for a long time. So I think his announcement with Tesla kind of had a momentary effect on the price,” Prodromos concedes, who nevertheless expressed her surprise at Musk’s pronouncements.
The Greek-American Bitcoin exec points to several independent studies comparing Bitcoin and its energy costs to the US dollar based “Fiat” banking ecosystem. “The economic cost of Bitcoin is obviously much, much less,” she notes.
She notes that several other entrepreneurs, like Michael Saylor, did double down on their belief in Bitcoin after that announcement. “I think Tom Brady bought during that price dip as well, showing his interest in it,” she adds.
Cryptocurrencies need some regulation
“I think people are recognizing Bitcoin’s value and that it is a scarce digital asset, that will gain in value over the long run,” Prodromos says.
In fact, there are only 21 million bitcoins that can be mined in total, with the final coins being minted in around 2140. Once the circulating supply reaches its maximum, Bitcoin miners will no longer receive block rewards — since there’s only ever going to be 21 million of them.
The limited supply of Bitcoins is one of the reasons, proponents believe, that its value will keep on rising despite occasional hiccups.
“I’ve been around in the space for the last five or six years or so. And even in that time we’ve had price dips like this before, we’ve had several magazine articles over the years declare that Bitcoin and cryptocurrency is dead,” the Greek-American exec notes.
The cryptocurrency community is growing “despite lots of lots of misinformation and somewhat bad press over the years. It’s just really continued. And I think the resiliency of the Bitcoin community kind of speaks to that.”
Prodromos says that the problems facing Bitcoin and other cryptocurrencies are the same kind of problems faced with any emerging technology — “there’s always going to be this kind of push and pull between government, entrepreneurs and innovators.”
She is in favor of some form of state intervention in the cryptocurrencies community, admitting “Governments need to play in terms of protecting citizens from fraudulent actors.
“Like, for example, in 2017, when there was this huge explosion of growth with the initial coin offerings (ICOs), and the U.S. Securities and Exchange Commission (SEC) stepped in to make sure that citizens weren’t being taken advantage of,” she notes.
Technology “leapfrogging” accelerating
“Technology ‘leapfrogging’ is very much accelerating, with nearly half of the world’s population now having access to a smart phone. Access to the internet in this way makes it easy for anyone to open their own cryptocurrency wallets — as long as they do not lose their passwords,” Prodromos says.
Some critics say that cryptocurrencies are only suited for the developed world, where access to the internet and smart phones is prevalent. They claim that a new chasm may be created between developed and developing countries, if cryptocurrencies continue to proliferate.
Prodromos disagrees. She says that cryptocurrencies, such as Bitcoin, can be used for truly worthwhile purposes, such as securing economic freedom for those in developing economies.
“For example, Bitcoin can be used as a kind of digital gold or store value and hedge against hyperinflation. In places like Argentina and Venezuela, where there is massive hyperinflation, cryptocurrencies such as such as Dash and Bitcoin have been able to flourish,” Prodromos notes.
The executive believes that Bitcoin and other cryptocurrencies can help developing countries, saying “People really only need an internet connection and a smartphone to be able to participate in these networks.”
Very promising future for cryptocurrencies
Although she acknowledges that for many in the developing world, entering the cryptocurrency space is difficult, in a lot of those countries, she says, it’s just as difficult to obtain a bank account.
“In many parts of Africa and Asia today, it is very difficult to open a bank account, so these cryptocurrency accounts could be good alternatives to help non-technical people store wealth,” Prodromos explains.
Cryptocurrencies require that you have a public or private address at a very basic level, and then you store your own “keys.”
“So it’s not the case where for example, you have a third party custodian or a bank that is keeping track of your accounts and your ledgers, that stuff is all kept kept track of on these public blockchain networks. And as long as you have the ability to hold your own keys, you can keep track of your own cryptocurrency.”
Prodromos stresses that the cryptocurrency community should continue to allow technological literacy to flourish worldwide. She adds that there are many companies that are working to make this happen.
This includes those that allow you to download very simple digital wallets onto smartphones. And others as well — which also allow you to earn rewards from just buying anything online with cryptocurrency, like a company called Lolli, which has been doing this for the last couple of years.