I’ve been curious about what happened to gold-backed crypto companies like eToro (ETO) and Gatecoin (GSC), lately. I wondered if they had become too big for their boots. One thing that interested me at first was how this phenomenon of a “golden bubble” popped so fast. But there were two things on my mind:
What is going on with these companies? How did those problems get solved, in case it was just chance? And is our system really designed by humans for people to want to buy stuff without actually holding money in them?
The answer, however, was more complex. Here are some reasons why bitcoin prices shot up, and why gold is still here, but not as easy as we used to think.
1 — Crypto Price Movement Is Not Just A Bubble
I have no idea what caused cryptocurrencies to spike as high as they did last week, although there are several logical explanations, such as increased demand from institutions or speculators looking for better returns. However, even after hitting all-time highs, cryptocurrency has now fallen back down, and crypto market sentiment has been mixed. It can be argued that bitcoin bulls are overreacting; most people would say that markets have already overbought BTC.
However, it’s also worth noting that when you look at other cryptos, there is usually an influx of new participants trying a coin with little intrinsic value. For example, DeFi protocols can change their rules, leading to massive price fluctuations and volatility. That doesn’t seem to be the case with Bitcoin. As far as trading volume goes, bitcoin was ahead of Ethereum (ETH), Solana (SOL), Cardano (ADA), Polkadot (DOT), Tether (USDT), Terra (LUNA) and Avalanche (AVAX). Most of these coins hit all-time highs.
2 — Some Companies May Have Hacked Their Websites Or Accounts To Make More Money, Either By Getting Listed In News Media Or Being Featured On Social Networks
It seems that a lot of companies are starting to stop doing business with investors because of fear of hacking or fraud. This may not happen again soon, since hackers tend to only target smaller businesses, but the future could be very different from today. According to Insider, one user claims to have $20 million stolen from her BitGo account alone. If she loses millions, then so may everyone else on Wall Street, which could be catastrophic for the country. Since the government owns a majority share of Coinbase, and if he loses control of his company, then that could cost him his job. Maybe crypto will eventually make its way into law as well. In any case, these stories are not the sort of crimes that regulators typically pursue.
3 — Are These Problems Truly Technical?
Another major concern is whether the technical issues with the coins are solvable. Now, people who have invested in Bitcoin for years have seen wild gains during this current bull run. While Bitcoin’s price has risen dramatically in recent weeks due to factors such as increased demand versus fear of being hacked, there is no guarantee that the problem is simply because the tokens themselves aren’t fully deployed. You don’t need much computing power to do mining, nor does anyone expect anyone else to keep the network happy once it has enough computational power.
As part of your portfolio strategy, you should consider adding assets that might help provide immediate income for you without needing anything else. When your financial situation changes, especially if cryptocurrencies go mainstream, your wealth could also suffer substantially. Cryptocurrencies are often speculative assets and not backed by real money, so in reality, they are highly volatile with unpredictable patterns. They aren’t likely to give you much if not intermittent profits.
4 — People Will Need Much Less Time Than Before To Invest
If you thought that Bitcoin was supposed to be around for decades in the near-term, consider that it doesn’t seem feasible for many people to own a piece of this decentralized virtual currency for more than a few years. There is limited time available to earn interest on digital assets that exist exclusively online. This is true even though blockchain technology exists to create digital currencies that have the same underlying value to everything else. Even if you manage to secure Bitcoin long-term, it won’t make sense for most people to invest in it.
5 — Real Estate Investment Trusts Might Be Back Again Soon With New Regulations Set Alongside Wealthy Investors
I am a huge fan of REITs and hedge funds because they offer stable dividends, inflation protection, and tax shields. Additionally, they can potentially bring significant upside in risk-adjusted assets. Yet, investors have long struggled to find deals on properties without large banks involved until recently. At least according to CNN Business, there may be a possibility of Airbnb buying land for housing development instead of putting a house on Airbnb. All of this makes me wonder where real estate assets fit into a world dominated by tech giants today. I certainly hope so, yet there are some concerns, such as competition, regulations and other economic forces that are changing the game.
6 — What Exactly Do We Want Technology To Create?
I wrote earlier about how traditional asset classes such as bonds and stocks had been abandoned forever in favor of equities, cryptocurrencies, NFTs, social media platforms, metaverse, etc. Over the past ten years, there has been a trend towards technological innovation and adoption. Many analysts predict that these trends will continue in the near future. So will the value of physical items we purchase using cash gradually disappear? I do not know, but there is never a good reason for someone to suddenly start investing in certain assets.
7 — Should We Believe The Big Tech Trends Anyway?
Recently, Tesla pulled out of the acquisition of SolarCity, something that many thought would disrupt the automotive industry and create a new platform that brought solar energy to homes. Instead, Musk stated that a combination of SolarCity’s infrastructure and the electric grid might work best for the company. Another sign that tech is not always a surefire solution to every financial issue.
8 — Why Would Anyone Pay Upfront For An Asset That Isn’t Accumulating Value?
I just read about another story involving Alibaba’s CEO Ant Group, in which he announced that the Hong Kong Stock Exchange was terminating Ant’s listing in the HKSE. This means that Ant is losing billions of dollars, even before making an announcement about pulling out of the deal. This is bad news for both China and Ant itself, as it demonstrates that centralized ownership of assets does not necessarily equate to good things. Having said that, let’s not forget that Meta Platforms hold roughly 80% of the metaverse ecosystem, meaning their data points and algorithms are also part of the metaverse landscape. This is a critical step that will ultimately determine the success or failure of the metaverse. I hope to see it succeed sooner rather than later!