Mains Paper 3: Economy | Investment model
From UPSC perspective, the following things are important:
Prelims level: Read the attached story
Mains level: This newscard talks about the declining value of the bitcoins, which was expected by many experts. We have written many newscards on bitcoins, recently. Complement this newscard with them.
Declining value of bitcoins
- Bitcoin has lost almost half its market value in just the last month
- The price of bitcoin dropped from its lifetime high of over $19,300 to $9,300
Is there any chance of regaining its earlier value?
- Some bitcoin enthusiasts still believe that the currency may only be consolidating to regain
- But a look at the price chart of bitcoin, suggests that there could be some valid reasons to get worried about the strength of bitcoin’s price rally
- Each time it has tried to rally upwards, the price has failed to go past its previous high
Cautious time for investers
- A good time to buy bitcoin was when its price action showed a clear uptrend in price, which was over most of last year
- Now, when its price is showing clear signs of reversal, a prudent speculator is likely to keep away if not go short on the digital currency
- But this is not to completely rule out the possibility that bitcoin might stage a surprise comeback, as it has in the past after severe price corrections
What can we learn from these trends?
- Bitcoin’s present crash should come as no surprise to its sceptics
- First, the digital currency, has had negligible acceptance in the real world of commerce
- Second, it has always seemed foolish to think that governments, would be ready to allow private currencies to compete against national currencies
(Governments want monopoly power over the issuance of currency)