The Great Fortunes Threatened By The Fall Of Bitcoin

Bitcoin is in a negative spiral, its value has fallen considerably. From being worth more than $61,000 dollars in October of last year, it has been declining to its current $21,000 dollars, barely a third of the limit of a few months ago. The problem lies in the effects that this has generated, panic has been created among those who have resources in the cryptocurrency, which amplifies their negative streak. Not only the small users of Bitcoin have suffered, but also the large holders of the currency who have seen their fortunes reduced, this includes El Salvador, the first country to use the cryptocurrency as legal tender.

Why have Bitcoin and other cryptocurrencies fallen?

It should be noted that it is a multifactorial issue, it is not due to a specific cause, the fall has been several months since the peak of $61 thousand dollars last October. First are the global factors, specifically the Russian invasion in Ukraine that has affected the global economy, where the energy and food markets are two of the most affected. An increase in fuel and grain costs is expected, added to the problem that Europe already has with electricity and the effects of the pandemic that has generated high inflation. According to OECD data, inflation was 8.8% in March this year, compared to 2.4% in February 2021.

There are also other factors that have pushed Bitcoin towards the abyss: Elon Musk's statements have an incendiary effect on the value of the cryptocurrency. In 2021 he bought $1.5 billion in Bitcoin, he also announced with great fanfare that his company Tesla would accept cryptocurrency as a form of payment, but the idea did not prosper. Bitcoin mining has a significant environmental impact, which caused Tesla to reverse the decision to accept the currency , which was also done by Wikipedia, which no longer accepts donations with the currency. The fact that a person, like Elon Musk or Bill Gates, has the ability to positively or negatively impact cryptocurrency is one of the things that causes uncertainty that undermines confidence in it.

Thirdly, there are the regulations and movements made by institutions such as the Federal Reserve of the United States that add to the volatility that prevails in Bitcoin, finally, the confidence of cryptocurrency users who, when faced with their offer, do not distinguish between those that have a real structure and those that are frauds. The clearest example is that of the Luna-Terra twin cryptocurrencies, created by the Korean computer scientist Do Kwon , which collapsed just two weeks ago and generated losses estimated at $40 billion dollars when their value went from $118 dollars to $0.09 dollars, a disaster that could not otherwise impact Bitcoin.

The great fortunes of Bitcoin in limbo

In April, with Bitcoin at a value of $37 thousand dollars, Forbes magazine presented the list of the 19 billionaires of cryptocurrencies . The magazine calculates the value of the "cryptoeconomy" at 2 billion dollars, in this list Changpeng Zhao stands out, the owner of 70% of Binance, the most important platform for cryptocurrency exchange in the world. His case is interesting since despite being one of the best-known "crypto-millionaires", his fortune is not all in said currency, he has a minimal part in Bitcoin and a few days ago he announced via Twitter that he was a victim of the collapse of Luna -Terra, where he had invested about $1.6 billion dollars, although his total fortune amounts to $65 billion dollars.

The example of the owner of Binance shows how the fall of cryptocurrencies can affect "crypto millionaires", through their investments in companies in that industry and not directly by owning currencies themselves. In the other 18 positions on the list are precisely startup owners who may see their market value reduced due to the cryptocrash , as this period is also being called. But the most affected are undoubtedly the small investors, those who relied on the seemingly unstoppable growth of Bitcoin, who have seriously lost. Bill Gates declared last year that small investors should be careful with cryptocurrencies, their volatility could take its toll on them, he was not wrong . He commented that the risks of a market like cryptocurrencies should be left to characters like Elon Musk. However, if Bitcoin rebounds in the future, his words could be forgotten, although the trend is still far from it.

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El Salvador, a risky bet that seems to go wrong

An interesting case is that of El Salvador. The Central American country became the first to accept Bitcoin as legal tender thanks to the impulse of its young president, Nayib Bukele. They acquired 2,031 Bitcoin tokens, equivalent to $103 million dollars, according to information from La Prensa Gráfica. The problem is that the fall of the currency has reduced the value of the investment by half. The country is at a crossroads, on whether to continue with cryptocurrency or withdraw it as legal tender, the latter is what the International Monetary Fund advises. El Salvador has declared that despite everything, the impact on its economy would be minimal, although it is not yet clear, it is likely that there is a political background, since eliminating Bitcoin would mean a public defeat for President Bukele who is trying to modernize his country.