The price of Bitcoin plunged to its lowest point in two years. Coinbase, one of the largest cryptocurrency exchanges, lost value on the stock market. Even stablecoins — cryptocurrencies that claim to be backed by the USD, and therefore perpetually worth $1 have crashed. But what does this mean for privacy and cybersecurity?
Since cryptocurrency was boosted forth to the general public’s eye, it has been a topic of controversy, with many calling it a scam, and others believing it to be the future of financial privacy and security. One of its key selling points is that crypto offers a private, and secure alternative method of moving money, in an unregulated market free of the manipulation of politicians and billionaires. However, if the past week is any indicator, crypto as a whole is quite a ways from that goal.
According to SEC Chair Gary Gensler, the recent crash has resulted in the loss of over $800 billion. This leaves those who are invested in various crypto currencies unprotected; the supposedly ‘unregulated’ market is now working against the interests of the public. But what is the source of this crash?
Many believe that the independent nature of crypto would make it resistant to inflation and various economic crises. Bitcoin has no central issuer or authority controlling it, and that independence from government, many argued, should ensure that Bitcoin would hold its value through economic dips, international wars or drastic policy changes. We saw Bitcoin prove its value when Russia began using crypto amidst their own economic crisis following its sanctions. And yet, as worldwide inflation increases, and the housing market remains inaccessible to the average middle-class family, the world has seen many crypto investors divest to survive. As a result, the ‘manipulation-free’ market saw a $300,000,000,000 liquidation overnight.
Furthermore, investors have watched as world governments have moved toward regulation. Meanwhile, ‘crypto has been shaken by a wave of hacks and security breaches, including a $600 million hack of the Ethereum sidechain Ronin’, further challenging its claim to be a paragon of financial security. Such hacks have shaken consumer confidence in crypto and slowed growth from new potential buyers entering the field.
Edward Moya, senior market analyst at Oanda, told CBS News ‘the number of real-world use cases that would bring newcomers into the crypto space seems to be slowing this year’. In his words, “There’s a belief that mainstream adoption [of Bitcoin] is taking a lot longer than people expected,” Moya said. “Right now, what we’re seeing is that the crypto market is in a wait-and-see mode.” These sentiments, combined with the state of the rest of the financial market accumulated to contribute to last week’s crash.
Whether this slide continues remains to be seen. Some believe that things will only get worse as more and more investors panic, continuing to pull out their investments. Now that the price of Bitcoin dropped below $30,000, its price corrected when evangelists “bought the dip,” or entered the market at a discounted rate. They believe that amidst its day-to-day turbulence, Bitcoin will continue its zoomed-out growth pattern that it has displayed over the last decade, hopefully taking its rightful place as the future of finance.
