If bitcoin were a fighter, it would be one that refuses to give up, despite the punch it just received.
In recent weeks the cryptocurrency has taken a beating with the collapse of industry giant FTX and the arrest of its founder, Sam Bankman-Fried, in the Caribbean.
Bitcoin is used to taking a beating, but this “anti-establishment” fighter was already on the ropes after his most painful year yet.
Continuing with the simile, if the cryptocurrency were a boxer, he would be lying on his back on the canvas seeing stars.
He’s down, but is he finished?
From rags to riches
Bitcoin has a story that fits with a Rocky-esque plot.
When it started in 2009 it was seen as something insignificant, but until recently bitcoin was considered a gold mine.
When she started out in the lawless world of internet forums in 2009 she was just a featherweight prospect.
There was a spark, but only within a rowdy niche of fans who were true believers and who got almost nothing out of it: a few pennies at first.
However, over the years its promoters grew, helping to develop bitcoin and fighting against the system.
The value of the cryptocurrency rose to thousands of dollars and it began to be recognized and welcomed in certain places. It began to be accepted on specialized websites or in trendy cafes.
Slowly, and against all odds, bitcoin became sought after, like a prized boxer.
Thousands of imitators like ethereum, dogecoin and litecoin also emerged, before bitcoin achieved extraordinary fame and value in 2021.
People invested money in it and all other cryptocurrencies. One bitcoin cost almost $70,000.
The conventional system also began to open up to the possibility of investing in it and in other cryptographic projects.
“Decisive moment”
But then, in November 2021, bitcoin began to suffer losses and has continued to worsen ever since, with continued blows and scandals leaving it at its lowest point in years in value, confidence and excitement.
“This is a terrible time for the crypto space and we may see even worse days after the recent FTX scandal. This is a defining moment for crypto,” Stefen Deleveaux, president of the Caribbean Blockchain Alliance, stated.
The FTX crash last month has been the biggest setback for cryptocurrencies in years.
It was the second largest exchange in the world – the entry point for millions of people to enter the world of cryptocurrencies.
It was seen as one of the most reliable platforms, but it crashed days after its financials were revealed to be shaky.
FTX founder Sam Bankman-Fried is now in custody, accused by the US of building “a house of cards on a basis of deception, while telling investors it was one of the safest buildings in crypto.”
Bankman-Fried told that he hoped he had not killed cryptocurrency.
The collapse of FTX, a company founded by Sam Bankman-Fried, has been the biggest setback for Bitcoin in its short history.
FTX has certainly dealt a heavy blow, but 2022 has repeatedly pummeled cryptocurrencies.
“We’ve never seen anything like this in cryptocurrency before,” said Professor Carol Alexander of the University of Sussex Business School.
She predicted last year that cryptocurrencies would crash in 2022, but admitted she was surprised by the sequence of events.
Hit after hit
The first big blow came in May with the sudden collapse of two popular digital currencies that wiped out $400 billion worth of bitcoin and the crypto ecosystem.
Do Kwon, the founder of the two terra coins, is now wanted by the South Korean authorities, who accuse him of hiding in Serbia.
Numerous other smaller scandals have shaken confidence in the cryptocurrency ecosystem, such as Kim Kardashian being fined $1.26 million for promoting a troubled currency.
The founder of the failed terra cryptocurrency, South Korean Do Kwon, is also being sought for prosecution.
There has also been the collapse of the previously booming non-fungible token market, with NFTs previously fetching millions now struggling to sell.
Massive hacks at crypto companies have also affected trust, with hackers stealing $600 million from the Ronin network.
With the collapse in the value of bitcoin and other cryptocurrencies, large companies in the sector such as Celsius, Three Arrows Capital and BlockFi have declared bankruptcy, leaving investors small and large without money, and the police investigating what happened.
The price of a bitcoin, often seen as a barometer of how the entire ecosystem is doing, is now hovering around $18,000, a 70% drop from its peak in November 2021.
US authorities said Kim Kardashian was paid $250,000 for promoting a controversial cryptocurrency without declaring she was paid for it.
Will crypto come back?
The fall of FTX and others leaves a huge void in the industry and a lot of jitters about other players.
On Tuesday, December 13, more than $1.4 billion was withdrawn from Binance, apparently as a result of the negative headlines about cryptocurrencies.
The company’s chief executive, Changpeng “CZ” Zhao, urged calm on Twitter, saying it was “business as usual.”
But Andy Renshaw, Feedzai’s senior vice president of product management, asserted that cryptocurrencies require a strong and diverse group of exchanges to survive this ongoing fight.
Experts believe that cryptocurrencies will rise from the ground and recover the space that they had until a few months ago.
“Without a credible and trusted place to trade safely, cryptocurrencies are unlikely to return to title-fighting status, no matter the title,” he explained.
Digital currencies are, of course, only one part of the crypto ecosystem, but most of the forecasts about how they will rise in value in the short term are pessimistic.
Professor Omid Malekan of Columbia Business School acknowledged that things look bleak for cryptocurrencies as a speculative asset.
“Prices have come down and many of the biggest providers of investment-related services have gone bust,” he said.
After recalling that cryptocurrencies continue to be, above all, a technology, the expert asserted that if only this aspect is looked at, the balance is positive. “They are doing well, in some ways better than ever.”
Malekan recalled that the adoption of bitcoin and so-called stablecoins in developing countries without a reliable financial infrastructure shows that technology is improving lives.
Deleveaux also denied that the violent booms and busts of cryptocurrencies belie the general progress of these instruments.
And he pointed to how charities are using crypto to get funds to places where normal money can’t go due to conflict or repression.
He also explained that the latest scandals are “an opportunity to purge scammers” from cryptocurrencies.
“Crypto is basically a very short word for the future of the global digital economy,” Professor Alexander noted, citing the use of crypto technology in building metaverse environments that some think will be the future of work and life.
