Mr. Felix Hufeld, the President of Federal Financial Supervisory Authority [BaFin], talked about Bitcoin and blockchain and compares this infancy of blockchain with the advent of the internet. He says that even Bill Gates at that time did not pay close attention to that new phenomenon.
Trying to ensure that you do not fall on your nose might mean that you are crawling on your tummy, he said, quoting Heinz Riesenhuber, speaking about how valuable distributed ledger technology can be, yet it has a darker side as well, mainly the security and anonymity issues.
He begins by saying that the most well known blockchain applications are cryptocurrencies like Bitcoin, but he stresses that blockchain extends further. The decentralized nature of this technology lends itself very well to anonymity, making public blockchains vulnerable to abuses such as money laundering or terrorist activities. With countless applications for this technology, there is bound to be issues of this sort.
Estonia, the world’s most digitized country, has already integrated blockchain technology in many public administration services, while Switzerland has had a startup since last July, working on land registry entries.
How does one deal with the tension between innovation and security? Facing the risks of technology, one can not afford to deregulate their opportunities. Nor can regulators or investors be endangered by the risks of blockchain and cryptocurrency volatility, he said.
He reveals that he sees smart contracts as Janus-faced entities, somewhere between hype and success. Yet they have blatant weaknesses that make them inherently susceptible to cyber attacks, an ever-present threat in this digital world. These smart contracts are also not ‘smart’, at least not yet. They are computer codes, with a yes or no output. They can not be expected to retrospectively evaluate their instructions, nor can they ‘judge’ the contract and the principle behind it, making them inflexible.
However these smart contracts enable decentralized computer programs, ‘dApps’, which can be revolutionary. Some even consider this model the real economic alternative to the current centralization tendencies of banks.
The problem of anonymity is also being solved, with traders being required to identify themselves to meet crypto trading platforms’ requirements, to tackle problems like money laundering.
It is indeed a hype, even a bubble, that Bitcoin was priced so high at the end of last year. Investments in Bitcoin still remain highly speculative, and total loss is still possible, he warns.
He remembers the time when outmail was delivered by a mailman, and cable and dial telephones populated posh homes. Compare that to today’s smartphones. Perhaps, he muses, the day is not too far away when people look at blockchains and wonder how money transactions were even possible without this technology.
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Bitcoin will likely be valued at $100,000 with a market cap of over $2 trillion before the end of 2021
The entire cryptocurrency market seems to be on the brighter side of the market since the beginning of the year. A majority of the coins have recorded significant recoveries from their 2018 slump, a period during which most coins lost over 90 percent of their value, when compared to their all-time highs. Among all the coins in the market, Bitcoin [BTC] aka the digital gold, was noted to be making a massive comeback as the coin breached the $11,000 mark after nearly 15 months. The coin however, soon retracted to settle below the $11,000 level.
According to CoinMarketCap, at press time, Bitcoin was trading at $10,887.27 with a market cap of $93.549 billion. The coin recorded a 24-hour trading volume of $20.757 billion for the past 24 hours and saw a massive rise of over 17 percent over the past seven days.
Anthony Pompliano, Co-founder of Morgan Creek Digital Assets, predicted that the largest digital currency could rise to reach $100,000, before the end of 2021. Pomp added that he was around 70-75 percent confident in this prediction. He stated,
“As I have previously said, making predictions is difficult […] Part of my process as a professional money manager is forming a thesis (price target), identifying a timeline (date), and establishing a confidence level. And then constantly re-evaluating those three aspects of my thought process as I receive new information.”
Pomp however, listed six pointers that have to be understood beforehand. First, this prediction is not an investment advice, and people should do their own research before investing in the digital currency. The second is with respect to Bitcoin’s volatility, with Pomp remarking that since it was a highly volatile market, the coin could witness a significant fall before being valued at $100,000. He stated,
“I anticipate that there will be numerous 20-30% drawdowns from new all-time highs as the asset continues to appreciate in value. These mini-boom/bust cycles should not cause panic, but rather need to be understood as natural market dynamics whenever an asset gains significant value in short periods of time.”
Further, the partner of the investment firm stated that the rise would be driven by several catalysts. This includes institutional adoption, exchange-traded funds and retail product approvals, global instability, governments all across the globe manipulating currencies, markets and economy. He went on to state,
“The market cap of Bitcoin will reach $2+ trillion when Bitcoin is worth $100,000. This is less than 1/3 the market cap of gold and less than 1/40 the global money supply.”
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