A hidden market that has been active during the past recent years in the whole world, which is the sector of trading in cryptocurrency (digital), in which investors have found a haven to invest with high inflation rates, but a severe blow was recently dealt to that sector.
This came due to the announcement of the “FTX” platform (one of the most famous cryptocurrency platforms), and the liquidation of nearly 130 of its subsidiaries was announced. .
What is cryptocurrency?
It is any form of currency that exists digitally or virtual and uses cryptography to secure transactions. There is no central issuing or regulating authority for cryptocurrencies, and instead uses a decentralized system to record transactions and issue new units.
The cryptocurrency market is not subject to pricing rules according to supply and demand, such as real estate and gold, so its results cannot be predicted, according to Dr. Khaled Rahouma, Professor of Economics at Damanhour University, noting: “The FTX platform declared bankruptcy because mining cryptocurrencies or determining their value is subject to complex mathematical rates. It is solved using high-powered computers.”
• The mining process consumes high energy that is not available to a large sector of the platforms that enter the field, so they suddenly declare bankruptcy.
• Algorithms that are solved in the cryptocurrency sector become more complex as the volume of mining increases, that is, the number on which speculation is made.
• Not being subject to the forces of supply and demand in the market in the declared and transparent manner on the platforms increases its danger.
Speculation in the cryptocurrency market is very dangerous because it is an unsafe investment, according to Rahouma, and many of these currencies have lost their value during the recent period, resulting in very huge losses for investors.
• Investors should stay away from the cryptocurrency market and go to safe havens such as gold and real estate.
• The platform on which cryptocurrency is traded hides its owner, so it is not safe
• In an instant, if the supply side increases in an excessive and unexplained manner, the value of the currency will decline.
Rahouma describes dealing in the cryptocurrency market as speculative, advising everyone to keep their money away from this insecure market: “Real estate and gold are tangible entities that have a market and rules of supply and demand, so they are the safest.”
There are more than 4,000 digital currencies traded daily, and only 10 are the highest, to retain the largest market capitalization, and the value of cryptocurrencies has risen to exceed $1.8 trillion.
Expectations of losses
Dr. Samar El-Bagoury, Professor of Economics at the Faculty of African Studies, Cairo University, is an unsafe investment haven that is not under supervision, and during the recent period there have been many currencies whose prices have decreased dramatically, and their investors have lost their money.
• Cryptocurrencies have a huge gain and the size of their investments is large, but they are not safe.
• Changes that occur in the gold or real estate market are not as severe as the changes in the cryptocurrency market.
• The currency of FTX collapsed in its price because it does not have a watchdog or a specific party to which the investor can turn to accountability or be a guarantor of the currency’s assets.
Al-Bagoury explained that the investors of that currency lost their money, although there are cryptocurrencies that are subject to the rules of supply and demand, but they are not safe: “If there is any price crisis and the investor tries to recover his money, he will not be able to.”
• The profits of cryptocurrencies are huge due to speculation, but the risks are greater and they are not safe.
• Dealing with cryptocurrencies is a risk, while investing in gold and real estate is speculative.
• The cryptocurrency market is expected to start declining after the losses of FTX.