Yi Xianrong: bitcoin bubble burst and minority wealth destruction

Source: financial website

According to Bitstamp, November 25, 2018, bitcoin dollar after hitting a low of $3601, since 2017 September lows refresh. However, in December 2017, bitcoin prices peaked at $19666. What is this concept? If bitcoin was born when the price of $0.000764 rose to $19666, an increase of 25 million 740 thousand times. But the current decline more than 82%. But Bloomberg is expected, bitcoin will continue to fall to $1500 or even lower level.

The total market value, digital currency in January 8, 2018 reached $813 billion 900 million, by June 13th, the market value has shrunk to $289 billion 100 million, 5 months, lost $524 billion 800 million. 5 months later, in November 19th, the market value of a $186 billion 100 million, again by 100 billion. From January 8th to November 19th this year, a total of $627 billion 800 million decline, the decline was as high as 77%! Absolute proportion bitcoin plummeted, other digital currencies will certainly fall. In November 25th, digital currency including Ethernet square, coins, coins, Gerbaud Wright EOS, appeared in more than 10% of the decline. A bitcoin bubble is burst, a bitcoin dream of wealth destruction. This trend is already inevitable.

In general, digital currency, English DIGICCY, is “Digital Currency” (digital currency abbreviation). According to the British economist Hicks claimed that the money is defined by its function, then the digital currency can be defined as the carrying unit of account in the network world (or value), means of payment, and a store of value for the digital. The specific form of digital currency can be a source of entity account number, can also be recorded in the name of a specific cryptographic algorithm verification and consensus number. The former is the general electronic currency (Electronic Money), which is composed of the 0 and 1 numerals, is converted to digital currency. For example, widely used in the electronic bank and the three party payment currency is electronic currency. The latter is the algorithm of currency or encrypted digital currency created by the blockchain Technology (Cryptocurrency). The algorithm can be divided into currency without a publisher but through the algorithm encryption technology created by currency, such as the most classic is the bitcoin is in the development stage; and the central bank issued by the national legal digital currency. Here is a digital currency bitcoin as a representative of the main discussion.

Generally speaking, as a modern social credit money, whether it is legal or illegal, either online or offline, it must have the basic attributes of payment, valuation, reserve, and these attributes basically embodies a kind of social or market credit relationship. The credit relationship not only points to the credit itself, also pointing to the credit guarantee, otherwise it is not possible to become a modern society or the market credit money, can not be recognized by the whole society or market. According to the relevant information, bitcoin was born, in 2008, signed published a research report: “Nakamoto bitcoin: point-to-point electronic cash system” (Bitcoin: A Peer-to-Peer Electronic Cash System), then in 2009 the actual operation of the system, the first bitcoin was born. That is to say, a fundamental reason bitcoin turned out is to solve a problem on the Internet for decades, that is how to create a real “cash concept” on the Internet payment tool. While cash transactions can be used anonymously. However, in the real world, we use cash often by statutory authorities of a country to be issued by the state of the currency of cash and credit guarantee. But the transnational nature of the Internet, even on the Internet has created a “cash concept” trading tools, but this “cash” which country to issue, its credit is how to establish and who will guarantee? These are the credit problem on the Internet, but also has been unable to solve the problem.

So, in order to Nakamoto etc. computer programming genius and to block chain technology innovation as foundation of bitcoin, and in order to solve the problems mentioned above have not been able to solve. That is to say, the construction of the Cong bitcoin blockchain technology, on the surface does not need to establish the traditional credit relationship, traders can pay the transaction with low cost, safe and anonymous way on the internet. Bitcoin credit relationship established by the computer program of the encoding technology. But a credit money, whether technical design how delicate and perfect, but it can’t compete with the legal tender of the price is not recognized by the market. This money can only be built on all castles in the air, there is no value. So, bitcoin was born until after 2010 years 5 months, basically No one shows any interest in. Until May 18, 2010 the first bitcoin transaction, then someone bid 10 thousand bitcoin exchange was only 25 dollars Griddle Cake. Each bitcoin price is only $0.0025. Later, the online black market Silk Road (Silk Road) was founded at the beginning of the 2011 website, the price of bitcoin in the underground economy and currency of price rising to 2013 year bitcoin $15 (now bitcoin price by $0.000764 rose to $15, or up to 19634 times).

While bitcoin can really currency to the price and the soaring fast, March 16, 2013 Cyprus banking crisis erupted after a lot of money at that time in southern Europe is through government regulation of bitcoin breakthrough flight. It is also from this time, several major bitcoin trading platform China soon perk up, after China investors poured into the market to the avalanche. Bitcoin is at the beginning of the $15 up to $1250, up 83 times. The trading volume of more than 80% in Chinese market, bitcoin speculation atmosphere is very crazy. The central bank China 2013 years 12 months after the shot, in Chinese bitcoin transactions regardless of the price or trading volume began to silence. However, with the 2016 block chain concept in China hot, in the etheric Fang (Ethereum) as a platform for ICO financing began to prevail in the country, which caused great enthusiasm compared to domestic investors bitcoin digital currency. From the beginning of October 2016, bitcoin trading volume soared. From the beginning of 2017, the price in bit LED digital currency began rapidly soaring. For example, at the beginning of 2017 to 9 at the beginning of the month prices rose nearly 400 times the etheric coins and all digital currency prices are crazy soaring, while the trading volume of 98% occurred in the Chinese market. At that time, Chinese bitcoin digital currency market basically entered a completely crazy. Finally, the government had to force Chinese completely shut down and other digital currency bitcoin trading platform and market.

From bitcoin and Chinese in development, although bitcoin is some people deified, but bitcoin born with defects make it difficult to find in the survival of the soil. First of all, Nakamoto using computer software technology to create a bitcoin, it is on the network cash payment system, also is a kind of complete credit monetary system, but the credit is established by way of technology and gain, or before the set preset in the algorithm language system. If bitcoin is also in its function to define the connotation, then bitcoin basically no money. For example, the price of bitcoin is not only easy to shock, huge fluctuation (sometimes a day up 50%), and rose up to 25 million 740 thousand times (from the initial $0.000764 up to $19666 in December 17, 2017, the current fell to 3601 U.S. dollars). Bitcoin prices soared and such fluctuations, lost money value scale function, can not become a means of payment, and a store of value tools (i.e. bitcoin founded no real wealth support, its little cost is totally negligible, then after the name of speculation, prices rose 2574 million times, is completely the result of frenzied speculation, but its intrinsic value is no change).

Secondly, as a kind of complete credit money, although the designers believe that founded by block chain technology bitcoin itself is credible, but also can guarantee the credit technology. But in fact, bitcoin designers not only to establish a corresponding system to guarantee its credit, and the current block chain technology is not mature and the defect cannot establish their own credit and the credit guarantee. Especially in the current block chain technology is only in the experimental stage, if the comparison in this state of bitcoin digital currency and widely used, its problems and risks will soon be exposed. The collapse of bitcoin and related sites are often black is proof.

Third, bitcoin features be deified, it is the root of the defect is exposed to the most incisive. For example, bitcoin supply of hard constraints and anonymity. The bitcoin market played amazing properties is itself issued in a limited and transparent, in order to overcome the financial theory of excessive credit expansion and inflation caused by the reconstruction of the monetary system, people now confidence. But don’t say the money supply constraints caused by the history of the gold standard for credit currency deflation pressure finally replaced, but only after the bitcoin digital currency issue is caused by the wave of financial bubbles than ever more violent, more big. According to the statistics of coinmarketcap.com, to 2018 years 10 months 31 days 12 Beijing time, bitcoin, there are 2086 encryption and 15545 encryption currency exchange currency. Or bitcoin profits for small and medium sized digital currency and a large number of new commodity derivatives. Although every kind of bitcoin emphasized its limited and transparent properties, but because these digital currency defects can be created, unlimited. This and other digital currency bitcoin creation than currency issuance is created and has the characteristics of unlimited expansion. If everyone on the network can use a computer program to create numerous digital currency, so they will not only destroy the modern financial system, it is easy to let a few people across the whole social wealth. In this case, the entire social and economic order and market order will be all gone.

Fourth, digital currency to social recognition, have on the price of currency. We can see that after the bitcoin was born, not currency current on the price, so it is rarely. At first it is more service to the underground economy, the real market is only known 2013 Cyprus banking crisis and Chinese speculative speculation into this market stir, to price in rmb. You can see it every few years and other digital currency bitcoin prices are crazy, and the price of RMB against the frenzied speculation results. In 2017 China launched ICO tide is the currency of the frenzied speculation pushed to the extreme. So, always blowing and other digital currency bitcoin advantage has not only become a very magical anonymous bitcoin, and became a malignant tumor that endanger the healthy development of social economy. So, the technology of bitcoin created credit relationship not only to serve the social and economic development, and the use of the underground economy.

Therefore, in recent years, with the rise of digital currency boom, some underlying and related technologies, such as block chain technology and Distributed Accounting widely, has been shown to have certain application prospects, but the underlying technology is still not mature, still have to move in the test. At present, the popular bitcoin digital currency, it is hoped to become a complete credit money, only hope to use technical ways to create and establish, to lead the credit relationship between presupposition. So this digital currency still exists and the fundamental limitations of history as the value of private monetary instability, credibility is not strong, can accept a limited range, prone to large negative externality. On the surface of the designer is to give the network transaction provides a similar cash transaction system, in fact has become a minority sweeping social wealth tools. So, when this tool in everyone wants to enter the profits of the country, it soon became a frenzied speculation tool, and make digital currency prices suddenly soared, blowing a history of the largest digital currency bubble. But recently the bubble burst, and these people will naturally pursue wealth destruction, this is the market logic and law! I hope Chinese investors can not gain profit in risk.

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