Bitcoin and cryptocurrencies have become a hugely popular topic on the internet and in the mainstream media over the past few years. This alternative way of investing, previously known only to a handful of enthusiasts, became a topic that began to ignite the desire for profit. We are talking about many individual and organizational investors. However, this reckless pursuit of unbridled profits can lead many unwary money-seekers into big financial trouble.
Cryptocurrencies in 2023 is not 2012!
In 2022, we saw another giant collapse in the price of bitcoin, and with it other cryptocurrencies such as Ethereum or Litecoin. This happened despite investors' expectations regarding further market implementations of this innovative invention and the development of appropriate infrastructure to reduce its environmental impact.
Many experts see the reason for the fall in prices on cryptocurrency exchanges in some of Elon Musk's negative tweets regarding the negative impact of bitcoin mining on the environment. But is this thesis correct?
The impact of cryptocurrencies on CO2 consumption and climate
To answer the question about the impact of cryptocurrency mining on the climate, one should turn to the facts. Most of the power of the Bitcoin network, which is estimated as the mining power of the so-called hashrate, is located in China, which at one time directed surplus electricity production to Bitcoin mining.
All of the mining power for bitcoin miners operating in China comes from electricity generated by the country's hydroelectric power plants. So what is important for every investor, and what does the average cryptocurrency investor not even want to hear about, blinded by the predictions of self-proclaimed Internet gurus about the future resumption of continuous growth?
This concept, which is overlooked by many investors, is the theory of technology diffusion. This theory states that when a new product enters the market, people's reactions to it can be divided into five categories and their corresponding behaviors. Thus we have the following categories:
- Innovators are a small group of people who need to test a technology in order to improve it.
- Heralds are a group of leaders of change who quickly make new decisions by raising their social status - they convince others to adopt new technology.
- The initial majority - this group is starting to use the technology - means that the reach of the new technology has already become huge and it has entered the public consciousness. Has bitcoin become widespread? Yes! But does he even have a chance to do it again?
- The late majority are the same as the early majority, but do not want to change their lives. Here, people are willing to pay bitcoin for bread, but only on the condition that they have it in their bank account. Forget about it!
- Conservatives are the last group, the most neutral and distrustful of new trends in the market and in technology.
How will innovation diffusion theory apply to the cryptocurrency market in 2023?
The answer to the question of how technology diffusion theory applies to the cryptocurrency market is simple. Over the past 10 years, cryptocurrencies have gone through a whole cycle of their development. First, they were associated with a small group of pioneers and innovators, the first developers who create simple solutions based on the management of the cryptocurrency market.
At the same time, the first cryptocurrency exchanges appeared, payment systems based on popular cryptocurrencies were created, and so on. As interest in the topic developed among the general public, people who are called the "early majority" appeared. We are talking about people who began to calculate whether this invention could be profitable in the future.
Then came the belated majority who started buying cryptocurrencies at a time when 1 bitcoin can already buy a good quality car, and even then you don’t know what it can be used for, except for storing in a digital wallet.
Finally, there were those who invested all their savings, only to lose them and join the ranks of those who are negative about digital gold. Another kind of conservative has suggested that it is too late to invest in bitcoin and it is worth looking at other cryptocurrencies, the purchase of which for little money can make them multimillionaires in the future.
Such altcoins in the future may be valued higher than bitcoin, which in the near future, due to the lack of developers willing to develop it, may reach another historical low until its value drops to zero, burying the opportunity for many people to enjoy their material wealth.
Cryptocurrencies in 2023 - summary
Obviously, the current 2023 is not like 2012, where, in addition to bitcoin, there are thousands of similar projects on the cryptocurrency market, which are also being developed for environmental friendliness, speed, and even greater efficiency.
Now, knowing the history of the price of bitcoin and realizing that it may turn out to be nothing more than a pointless acquisition, like a deck of Pokemon cards that do not produce anything and have only collectible value, you might think that bitcoin is overvalued, and your judgment will not necessarily be wrong. .
In fact, the conservatives described in this article are innovators who are looking for new and better alternatives to the sluggish Bitcoin network. Do you agree with this thesis?
