Roughly a decade ago, one bitcoin was worth less than $1 and the majority of the world had never heard of cryptocurrency. Now, if you don’t know what it is, someone will likely ask you about it in your everyday life.
Bitcoin is now worth well over $10,000 USD and much like when dot-coms were booming in the early 2000s, everyone and their mother-in-law has an opinion on Bitcoin (and whether or not we should invest).
If you’re a regular reader here, you already know that I don’t necessarily disagree with the crowd.
I’m for Bitcoin exactly because it is in itself a distributed ledger that also makes so-called “smart contracts” possible. But let’s first look at what makes people give their opinions on cryptocurrency, especially on NFTs (non-fungible tokens) like CryptoKitties.
Here are some points discussed about Why Are People Investing In Bitcoin And NFTs-
1. The Flippening
The term “flippening” originated in 2017, when Bitcoin’s price surpassed that of Ethereum. The perceived idea was that the digital currency would soon overtake all the major coins, especially Ethereum which had shot up to become the second most valuable by market capitalization.
This isn’t official because it has no empirical meaning, but it is still a very real term used by various crypto enthusiasts and investors. Most of these people believe that with Bitcoin and ether’s success as tokens will come an explosion of investment into other digital assets utilizing non-fungible tokens such as CryptoKitties or rare collectibles created through Dfinity’s ERC721 standard for non-fungible tokens.
Tether is a digital coin pegged to the U.S. Dollar, meaning that you can redeem one token for $1 of real money from Tether’s official website. Many critics have accused founder Brock Pierce of creating an elaborate scam, and a recent report from Bloomberg bolstered concerns about the trustworthiness of Tether’s tokens as a stable source of value.
While this hasn’t led to panic amongst investors, it has given rise to discussions about whether or not other cryptocurrencies are inherently more trustworthy than Tether’s USDT (which I’ll keep referring to as Tether). This could very well lead more independent investors towards tokens that are not pegged in any way to real-world currencies and fiat such as Bitcoin and Ethereum.
Perhaps the most common argument against cryptocurrency is that it is a scam and that governments will eventually shut down all decentralized exchanges.
While no legislation has been passed yet regarding cryptocurrency as a whole, law enforcement agencies around the world are cracking down on websites and businesses that facilitate the exchange of digital currencies for fiat.
For example, an aspect of Japanese law was recently revised to require crypto-exchanges to adhere to Anti-Money Laundering (AML) and Know Your Customer (KYC) policies. The U.S. followed Japan’s lead by announcing that digital coins are considered a commodity by the Commodity Futures Trading Commission (CFTC).
These regulations are likely to affect the major exchanges, but they aren’t expected to be as tough or restrictive for smaller platforms. This could possibly spell bad news for GBTC, the Bitcoin-linked exchange based on the Winklevoss twins’ Gemini exchange.
As of 2018, there are roughly 2 billion people that own a smartphone globally. Smartphones have become part of our daily lives in such a rapid period of time which has, in turn, led to more and more people getting into cryptocurrency – namely Bitcoin and Ethereum. Despite this, the majority of the world hasn’t embraced digital currencies nor is it expected to do so for some time. This means that if people haven’t gotten into cryptocurrency yet, it may be hard for them to get on board with NFTs or any new asset class altogether.
5. Scams/Pump and Dumps
Cryptocurrency markets are very volatile and make buying a coin a gamble where you may lose money or make more depending on your position. Pump and dump schemes are also prevalent in these markets, where certain individuals take advantage of this by inflating the value of an asset (usually through a fake news item) until people buy up said asset to sell at a higher price than they bought it for.
This is what happened with GBTC, which saw a one-day price increase of 84% (from $65 to $135) that was then reversed in less than 24 hours. While this is bad for holders, it shows that some investors could get burned by the volatility.