The value of the cryptocurrency market has recently reached $2 trillion for the first time on Monday.
At the same time, Ether, a cryptocurrency, also hit an all-time high of $2,151.25 on Tuesday morning Singapore time, according to CoinDesk.
Ether has been rapidly growing in value as the currency has gone up 180% year-to-date.
Similarly to Bitcoin, Ether also uses a blockchain method, making the transactions used with the currency completely anonymous.
Nevertheless, Bitcoin is still the king cryptocurrency, accounting for 50% of the market capitalisation.
Bitcoin is also the crypto with the highest value, Bitcoin reached a record high of above $61,000 last month, and, on Tuesday, it was worth about $58,000.
This rising value of cryptos is due to their increasing appealing among both individual investors as well as large corporations.
For example, some of Bitcoin’s spike in value is attributed to Elon Musk’s announcement of Tesla investing some of its revenue into the currency.
Consequently, the demand for Bitcoin ramped up because of this announcement, causing its value to spike.
Etherum has seen a similar trend, a Chinese app company known as Meitu bought $22.1m of the currency last month thus causing another surge in demand.
So, cryptocurrencies are vulnerable to these demand increases and decreases, consequently, their value frequently fluctuates and is not as stable as real money.
This is because cryptocurrencies operate on a completely fixed supply of money, therefore, there can only be a certain amount of Bitcoins in circulation at one time.
This is different to traditional cash as Federal reserves can choose to inject additional cash into the economy through quantitative easing.
Hence, due to the perfectly inelastic supply, whenever demand changes, the currency is subjected to price fluctuations.
This reason is why some are speculative about Bitcoin, the ability for large investors to invest in a currency which currently is completely unregulated paves the way for extreme market manipulation.
Elon Musk has shown interest in other cryptocurrencies such as DogeCoin. The billionaire entrepreneur has long been attempting to ramp up demand for the currency as he too wishes to have a large stake in its market cap.
In a traditional stock market, this would likely be seen as some degree of manipulation, so, because of the current unregulated nature of cryptos, large investment firms, billionaires, and ordinary people can get rich quick if they are lucky.
Therefore, it may only be a matter of time until governments decide to attempt to regulate crypto markets as they are prone to this manipulation.
And once this happens, cryptos may see a fall in their value as the primary appeal with them is that they are a completely anonymous form of currency.
However, with the growing endorsement of cryptos from large firms such as Tesla, who also announced they will be taking payments in Bitcoin, the value of the crypto market will likely increase in the long term before restrictions are put in place. It is not only large firms that are dipping their toes and generating demand but young, tech-savvy investors too.
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