Crypto expert is critical of renewed Bitcoin boom: "This can end badly"

• Zeke Faux examines the hype and fall of the crypto market in “Number Go Up.”
• Current price growth leaves crypto experts perplexed
• Without use cases, cryptocurrencies are likely to ultimately be forgotten

With “Number Go Up”, the investigative journalist and reporter for Bloomberg Businessweek and Bloomberg News devotes himself to the crypto hype in 2021 and the subsequent deep fall of Bitcoin & Co. As a reminder: the topic of cryptocurrencies was on everyone’s lips in 2021. Various celebrities promoted Bitcoin & Co., new cryptocurrencies with supposedly noble goals popped up like mushrooms and large investment funds also increasingly entered the crypto market. As a result of the Bitcoin boom, the original cyber currency set a record value of over 69,000 US dollars in November 2021.

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After the meteoric rise came the rapid descent. The year 2022 was marked by numerous scandals and bankruptcies in the crypto sector. The collapse of one of the largest crypto exchanges in the world at the time, FTX, whose co-founder and boss Sam Bankman-Fried has now been convicted of fraud, made headlines in particular. As a result, the Bitcoin price also fell rapidly again: almost exactly a year after its high, BTC bottomed out at a value of around 15,800 US dollars.

Perplexity in the face of another crypto rise

In 2023, Bitcoin was able to recover little by little and at the beginning of 2024 the cyber currency made headlines with a temporary jump above the $ 45,000 mark. Capital took this renewed crypto upswing as an opportunity to ask the investigative journalist his opinion on the current developments on the crypto market. However, the crypto expert is perplexed by the renewed crypto upswing and paints a bleak picture.

Faux says in an interview with Capital: “The fact that crypto prices are now rising again really amazes me, especially since it’s not just about Bitcoin, but also about obscure cryptocurrencies like Dogecoin, which avowedly has no greater purpose than a kind of fun gambling “No real use has been invented for any of these currencies, yet people are buying like crazy again. Even some scene heads are asking: Is it really going up again? That could end badly.”

Nothing but “hype and fraud”

During his years of research for his book, the journalist traveled to numerous countries and examined various aspects of the crypto scene in order to understand what was driving the trend and what the benefits of the numerous virtual coins were. However, he always found “hype and fraud,” as he summarizes, which makes it even more inexplicable to him why crypto prices are now going up again. Faux also makes a distinction between the original cyber currency Bitcoin and other altcoins, since Bitcoin has now acquired the status of a religion among some followers and it is therefore unpredictable what will happen to the cryptocurrency.

Lack of added value

However, other crypto projects would have disappointed the investigative journalist in his research, as none of the crypto startup founders he interviewed could explain what exactly the added value of their products would be if the currencies they issued did not continue to rise. Ultimately, his skepticism about cryptocurrencies is based on the fact that there is no use for digital currencies for “normal people”. There is simply a lack of use cases, which is why cryptocurrencies are bought by many people but are not used for anything. In addition, there is the great risk that comes with crypto investments, as altcoins in particular are highly volatile: “In addition, the crypto market is quite small compared to the stock market. This means that there are money flows that would not have a major impact on the stock market , can trigger major market movements in the crypto world. The altcoins are highly volatile – and they can collapse almost for no reason.”

Decentralization comes with disadvantages

Faux is also critical of the issue of decentralization, which is considered a major innovation and the argument for cryptocurrencies. In his opinion, decentralization comes with major risks and disadvantages, which is why he summarizes: “Decentralized systems are cumbersome and slow and expensive – “and consumers don’t really care about the advantages that crypto advocates cite.” The journalist refers to his own experiences , which he did as part of his research with cryptocurrencies. Faux wanted to purchase an NFT from the well-known Bored Ape Yacht Club, but this turned out to be extremely complicated due to the requirement to open a MetaMask crypto wallet. And as he was finally able to call the NFT his own, the thought that even one wrong click or losing his password could lead to the loss of his non-fungible token would have driven him crazy.

Nevertheless, the crypto expert was impressed that Bitcoin had managed to develop into what it is today despite the adversities: “It’s also pretty impressive that Bitcoin has existed in this way for years and no one has destroyed the system and was able to steal all the Bitcoins.” Nevertheless, the disadvantages would outweigh central systems such as MasterCard or Visa. Faux has also noticed this in developing countries, which are often cited as a good place to use cryptocurrencies (due to a lack of payment or banking structures). A prime example is the country of El Salvador, which has now accepted Bitcoin as an official means of payment.

Population of El Salvador not fond of Bitcoin

The journalist also ended up here on his research trips. However, he would have only experienced disinterest or even rejection of the cryptocurrency from the population. Ultimately, people in developing countries would also prefer to be able to use financial products that are easy to use. The group who ultimately benefit from cryptocurrencies are “fraudsters and scammers” – although Faux admits that citizens of authoritarian states would also benefit from the opportunity to hide their money using cybercurrencies.

Faux does not want to speculate about what will happen next with the crypto market and whether the renewed price increase in crypto prices will end in a downward spiral. However, he believes it is likely that people will ultimately lose interest in cryptocurrencies. A trend reversal could only occur if there were more useful applications or if something completely new were invented. Until then he sees black.

Editorial team finanzen.net