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Many people have been talking about one cryptocurrency in particular for years: bitcoin. Recently, bitcoin has been in the news since its price has been declining for a variety of reasons. The thing is, the average person probably still doesn’t know what bitcoin is or why it matters. Below, learn everything you should know.
What is bitcoin?
Bitcoin is a form of cryptocurrency, also known as “crypto.” Cryptocurrencies are digital currencies that can be used to buy goods and services. Cryptocurrency utilizes an online ledger with strong encryption to promote secure online transactions. Cryptocurrencies are decentralized, and many people buy them intending to trade them for profit. Crypto speculators can also dramatically increase or decrease prices.
Bitcoin is the first cryptocurrency. It was created in 2009. It is also the most valuable cryptocurrency. By April 2021, the price of one bitcoin exceeded $60,000, marking a new record. This value came right after the cryptocurrency exchange platform Coinbase went public. Its popularity has been rising, although there have been ups and downs in its value due to many factors, including halving cycles. Recently, though, bitcoin has been decreasing in value.
Why is bitcoin falling?
Below are several reasons why bitcoin’s value is in decline:
DarkSide/Colonial Pipeline scandal
On Monday, June 7, U.S. law enforcement officials said they had seized $2.3 million in bitcoin paid to a cybercriminal group called DarkSide. The group was behind a cyberattack on the Texas oil pipeline system Colonial Pipeline. DarkSide sells ransomware as a service, which means its hackers develop, market, and sell hacking tools to other criminal “affiliates” who then carry out cyberattacks.
DarkSide’s sweeping ransomware assault on Colonial Pipeline required the company to shut down approximately 5,500 miles of a fuel pipeline. This shutdown disrupted nearly half of the East Coast’s fuel supply, caused gasoline shortages in the Southeast, and led to airline disruptions.
Chinese government crackdown
The Chinese government has been escalating its push to rein in cryptocurrency, and its actions have affected bitcoin prices. Cryptocurrency mining has been a concern in China because this practice has stoked a surge in illegal coal extraction. This extraction comes from the fact that fast computers are required to properly encrypt cryptocurrency, and many servers in one location, called a server farm, are typically used. Extra coal helps power these farms.
Chinese authorities decided to act after seeing a spike in electricity consumption from several server farms. These farms largely drove the rising demand for coal in certain parts of China. This demand made some cryptocurrency producers restart unused coal mines without official government approval, leading to higher public health risks and an increase in deadly accidents this year. China’s central government responded by enforcing a ban on crypto exchanges.
Chinese social media crackdowns
Additionally, the Chinese social media platform Weibo has suspended some crypto-related accounts. If Weibo users attempt to view crypto-related accounts, a message comes up that says the accounts have been reported for violations of laws, regulations, or Weibo rules.
Elon Musk speaking out against it
Influential billionaire Elon Musk has also been tweeting jokes about bitcoin’s rival, dogecoin, which has been contributing to bitcoin’s value decrease. Musk tweeted and posted a meme that dogecoin is similar to the U.S. dollar and that it’s “made up money with infinite supply.” Musk’s mention of the cryptocurrency rival made dogecoin’s value skyrocket over 20 percent last week.
A small Goldman Sachs survey of 25 chief investment officers said that bitcoin was their least favorite investment. Approximately 35 percent said that bitcoin was their least favorite. This survey may have influenced increasing hesitance to buy bitcoin, thus devaluing it. For bitcoin owners, the result is less money on something that may have cost quite a lot in the first place.