After the Collapse of Bitcoin - What Happens to Cryptocurrencies?

Business | January 29, 2022, Saturday // 18:47
Bulgaria: After the Collapse of Bitcoin - What Happens to Cryptocurrencies? Pixabay

Cryptocurrencies collapsed by more than 15%. Bitcoin fell below ,000 and reached its lowest level in six months. In addition, the decline is expected to continue. What is ahead in the world of cryptocurrencies – the Bulgarian National Television (BNT) asked Vladislav Dramaliev from the Bithope Foundation.

BNT: The price of bitcoin is nearly 50% lower than in November 2021, when it reached its peak. Is this due to global inflation?

Vladislav Dramaliev - Bithope Foundation: Yes, but not directly. Inflation is beginning to worry world banks, which until recently said it was temporary and completely under control, but unfortunately, it turned out not to be the case, and it was in fact caused not only by printing money but also by slowing down the supply chain. For this reason, central banks, in particular the Federal Reserve, which is the US Central Bank, have announced that they will reduce the rate at which they will print money and raise interest rates on deposits. And in fact, this news is usually quite chilling in the market.

BNT: How much has bitcoin collapsed in the last week and at what price is it currently traded?

Vladislav Dramaliev: I guess around 15-20%. And it is currently trading at ,000 for 1 bitcoin. In fact, it has traded at these levels for only 15% of its history, so even these low levels are quite high for this asset.

BNT: How far can this price drop go?

Vladislav Dramaliev: The decline could even reach 90%. From now on, in my opinion, the amount that can reach a decline is about 20 thousand dollars, but this is again based on historical information. The advantage of bitcoin is that if it costs 20 thousand, 30 thousand, 1 million, there will be no more than 21 million bitcoins. Its total market capitalization, which means the number of bitcoins in circulation, at the current price is, I think, currently below 0 billion. Which makes it a fairly small asset. Especially if you have to compare it with other more popular ones.

Usually, people who believe in the product, even if they sell bitcoins, do so in order to be able to buy them cheaper, Dramaliev explained. Apart from bitcoin, there are 3-4 thousand other cryptocurrencies. Their declines are even more visible. There are projects that lose about 90% of their value. Perhaps the most affected are traders looking for quick profits, he added.

BNT: Where in Bulgaria are most bitcoins dug?

Vladislav Dramaliev: Usually diggers in Bulgaria are not very public.

BNT: Why?

Vladislav Dramaliev: One of the reasons is that the regulatory framework is not very clear and given how volatile the sphere is, the taxes they impose may not be absolutely appropriate. And if you have an asset that falls and its value drops by about 50%, and the tax authorities tax you in such a classic way, it may not be fair to them. There is a theory that may be refuted these days is that the Bulgarian state owns over 200,000 bitcoins that were seized in 2017. So we have to see if Bulgaria owns them.

Kraken Cryptocurrency Exchange: Bulgaria owns billion Bitcoin

I doubt that is so. Otherwise, as software companies and people who deal with cryptocurrencies, Bulgaria is at the forefront due to the fact that we have a lot of technology-oriented young people and people understand a lot from computers and operate a lot online. Separately, we have a lot of people who do not expect a pension from the state and are trying to somehow secure their old age, with an investment direction.

BNT: And rising electricity prices will affect bitcoin in any way?

Vladislav Dramaliev: Yes, in fact, they are always reflected. If you are digging for bitcoins, the most important thing is to have the internet, have cheap electricity and have the best hardware that does the most calculations. When the price of one of these components rises, it causes diggers to go out of the network.

BNT: What will this collapse of cryptocurrencies lead to?

Vladislav Dramaliev: Maybe it leads to the fact that bitcoins are moving from the so-called “weak hands” to longer-term investors in the field.

BNT: Is it worth investing in bitcoins now?

Vladislav Dramaliev: For long-term storage of bitcoins for more than 5 years, any moment is suitable. Historically, if you've held bitcoin for 4 years, you've certainly been making a profit. Now the question is what kind of profit you want to make.


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