What influences cryptocurrency values? | Financial Times

Those in the crypto world will know the carefree self-confident expression "number up". According to David Gerard, an author and journalist, the term in the area of ​​digital assets is about four years old.

While the term was in circulation before the creation of Bitcoin in 2009, let alone before the latest boom, he points out a fundamental question in the heart of an industry with over $ 2 trillion: What and who influences the value of crypto?

ask die -hard believers why Bitcoin was at 68,000 USD at the beginning of this month compared to less than $ 30,000 at the beginning of the year, and their answer could only be due to the fact that the market understands its true value.

Certainly financial institutions have made efforts last year to appear more crypto -friendly. Payment companies such as MasterCard and Visa are among those who have carried out experiments with digital currencies.

In politics, proponents of cryptocurrencies praised the decision of the authoritarian president of El Salvador, Nayib Bukele, Bitcoin in September in September. Then the new mayor of New York, Eric Adams, announced this month that he would like to have his first salary check in Bitcoin.

However, critics say that this does not necessarily lead to a healthy industry. "Bitcoin markets are massively manipulated," says Gerard. "The fraud is who can pay money if the bubble collapses. There are many reasons to be deeply suspicious."

There are many mechanisms that skeptics indicate when they accuse market manipulation. Let us take the case of "whales", which typically have more than 5 percent of a certain currency. You have the ability to dictate the wider market price by holding on to your hoards, pulling them out of circulation and driving the price up. Or, if you want to increase your stocks, you can sell enough first to drop the price.

The connections from Bitcoin to other cryptocurrencies have also aroused concerns about pricing. A paper from 2019 proposed a connection between the Bitcoin Prize and the StableCoin-Tther, which with the New York general prosecutor and the Commodity Futures Trading Commission on the reserves that had to support its supposedly stable value.

"Overall, our results support the view that price manipulation can have significant distorting effects on cryptocurrencies," write the professors John Griffin from the University of Texas in Austin and Amin Shams from Ohio State University. Tether argued that the paper was "incorrect"; The company that indicates that they have coins worth $ 72 billion in circulation must still give details about the short -term dollar debts that underpin about half of them.

There is now a universe of other digital currencies beyond Bitcoin. Many will be familiar with Dogecoin, who began as a joke before the patronage of Tesla boss Elon Musk drove up the price. Today this is considered to be too mainstream by some, which means that conceptual offshoots such as Baby Doge and Floki Inu try to benefit from his success.

The way in which these old coins-a far-frequent term for all non-Bitcoin cryptocurrencies-increase and fall in value can increase in a room full of "pump-and-dump" schemes such as the squid equally opaque. Named after the successful Netflix series, which is not connected to her, the price was driven up by speculation when media reporting attracted confident customers. In the end, the developers made no cash with $ 3.6 million from those who thought they were involved in the next big thing.

cryptocurrencies that want to deliver a dose of Fomo (fear, to miss something) can contact celebrities to support their products. Personalities from the actor Matt Damon and the American football player Tom Brady to reality TV star Kim Kardashian have all appeared in ads who advertise for cryptocurrencies or related companies.

Ben McKenzie, better known as Ryan Atwood in the teenage television drama the OC and James Gordon in gotham , is very critical of the practice. "I have no problem with celebrities getting involved in products," he says. But he adds: "There is a huge difference between audible [Audiobook] deals or any other project that can sell celebrities and effectively sell [A] Financial instrument or gambling - and a gambling in which you have no idea what the risks are."

For many investors, the chance that "the number will increase" is enough to tempt them to invest money in cryptocurrencies. But, as McKenzie says, concern is the opaque of the sector. This, combined with relentless boosterism about the transformative quality of crypto, helps to explain the rising prices. But it offers little security, not to mention the regulatory authorities and governments that are still dealing with the future of digital cash.