If there is one thing that has rattled investors’ nerves more recently than any other, bitcoin is surely one of them. Since the end of January this year, the market price of bitcoin has been rising rapidly, from $30,423.10 to a high of $57,492.90, a rise of nearly 90% in just one month. In mid-March, the price of Bitcoin soared above $60,000, up more than tenfold from last year’s low point, before falling back again.
Some people regard bitcoin as an “alternative asset”, and some young people are eager to try it. However, many people also question the real value of bitcoin, holding that it is necessary to pay close attention to the current risks and suggest that relevant parties strengthen supervision.
What is Bitcoin? Bitcoin is described as the earliest “peer-to-peer” virtual cryptocurrency. It is based on a specific computer algorithm, generated by a large number of calculations, and uses a distributed database composed of many nodes in the network to confirm and record all transactions. In a nutshell, Bitcoin is a complex string of computer-generated code with a ceiling of about 21 million.
Taking the 55 days between January 1, 2021 and February 24 as an example, if only based on the closing price of the US dollar, there were 27 days in which Bitcoin rose or fell by more than 3%, accounting for nearly half of the total number. It was “common” for Bitcoin to rise or fall by more than 10% on that day. Currently, one bitcoin is worth more than 350,000 yuan. When it was created, each bitcoin cost less than a penny. It is the “roller coaster” market that has repeatedly made Bitcoin the focus of people’s attention.
Mr. Fedu, who works in design in Shanghai, likes new things, and bitcoin intrigued him. “It’s impossible for me not to be excited by the recent spike in the price of bitcoin. Many of my friends are also eager to try this situation.” Watanabe said.
In recent years, some young people have flocked to the bitcoin field, while others have specially “mined” bitcoin mines in Inner Mongolia, Gansu, Sichuan and other provinces, hoping to get a certain Bitcoin reward in the process, which has led to the buying of high-end graphics cards and other equipment.
Still, most people are cautious or negative about investing in bitcoin. Liu Jianye, a fiftysomething Beijing resident, expressed his concerns about Bitcoin: “The roller coaster ride of the Bitcoin market is almost beyond ordinary people’s comprehension. The ups and downs are frequent and fluctuating wildly, as if by luck. At the same time, we are concerned about the legitimacy of Bitcoin, which is not officially recognized as a legitimate currency that can be used for payments. It is at best a virtual good. If ordinary people rashly ‘enter’, may accidentally become to be cut ‘leek’.”
Chinese regulators have made clear judgments about the nature of Bitcoin. In 2013, the People’s Bank of China, the Ministry of Industry and Information Technology and other five ministries and commissions issued the Notice on Prevention of Bitcoin Risks, which clearly pointed out that Bitcoin is not issued by the monetary authorities, has no legal compensation and mandatory currency properties, and is not a real currency. In nature, Bitcoin is a specific virtual good, which does not have the same legal status as currency, and cannot and should not be circulated in the market as a currency. However, as a commodity trading activity on the Internet, ordinary residents have the freedom to participate at their own risk.
Regulators also made it clear that, given the nature of Bitcoin as a specific virtual commodity, there may be higher risk of speculation, higher risk of money laundering and higher risk of being used by illegal criminals or organizations.
In 2017, and other seven departments of the People’s Bank of China “for the issue of financing risk prevention tokens, the announcement again, any so-called tokens, margin trading platform shall not engage in legal tender and tokens,” virtual currency “mutual exchange business, may not be sold or as a central counterparty trading tokens, or” virtual currency “, may not provide tokens or “virtual currency” pricing, information intermediary services.
The qualitative and opinions of the regulatory authorities can be regarded as an important basis for judging the “investment value” of Bitcoin.
Zhao Qian, an education worker in Guangzhou, believes that the so-called “Bitcoin financial management” and “Bitcoin investment” are speculator’s games, which ordinary people should not get involved in. “Recently, Bitcoin broke through $60,000 and hit the so-called ‘all-time high’. It feels like the dealers created it, just to create a crazy atmosphere, and then get the ‘catcher’ to enter the market. It has a lot of 17th century Dutch ‘tulip bubble’ taste.”
Ms. Jia, who has worked in a financial company in Hangzhou for many years, said she would not get involved in Bitcoin, on the one hand, because she did not understand the security of this virtual product, on the other hand, she believed that over-giving it “high valuation” and “high expectations” would create huge potential investment risks. “While there is a clear cap on the number of bitcoins themselves, the supply of various’ virtual currencies’ under the rules of algorithms like these is potentially unlimited. Today comes out bitcoin, tomorrow may come out ‘XX’, the risk cannot be prevented.” She said.
In the opinion of Zhang Wen, a precious metals analyst at CITIC Futures, the biggest advantage of Bitcoin is that it saves the storage cost of currency and reduces the transaction cost, but its disadvantage of no sovereign credit endorsement and historical accumulation is very obvious. This is different from other investment products such as precious metals. For example, gold has been traded among banks for over a hundred years and has been used as the last resort of the IMF with strong stability.
A number of experts have called for improved regulation of Bitcoin in light of the new situation and to address the current problems of insufficient and lagging regulation.
Remarkably, as the price of bitcoin has climbed steadily, there have been more and more calls to be wary of the risks, both at home and abroad. European Central Bank Governing Council member Gabriel Makhloof said bitcoin investors need to be prepared to “lose all their money.” CMC market analyst David Madden believes that despite its current strength, Bitcoin is still a very volatile asset.
According to Dong Dengxin, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, the Bitcoin market has entered a stage of irrational and blind betting. Dong Dengxin believes that the more high, the more likely to attract more people’s attention, long investors may increase confidence. Blindly long once failed, losses will be very serious.
“Bitcoin has neither national sovereignty nor legal tender status, so its application prospects are very uncertain. At the same time, we have to see that central banks around the world are promoting the digitization of their currencies, so the chances of legal use of bitcoin in the future are very small.” Dong Dengxin said that Bitcoin as a new thing, to a certain extent has its technical content. But it is used to do investment applications, or there will be a great risk, it is suggested that the ordinary people without relevant professional knowledge do not blindly follow the trend to “Bo silly” “beat the drum pass flowers”.
A number of industry insiders said that if Bitcoin is regarded as an investment commodity or financial product, it needs to pay close attention to relevant laws, regulations and policies of various countries. Because changes in external factors such as the regulatory environment will directly affect the price trend of Bitcoin. In addition, the relevant authorities also remind investors to guard against some criminals using Bitcoin to cheat or illegally raise funds, do not blindly believe in the hype promise, should establish a correct investment concept, and effectively raise the awareness of risk.