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Fed Issued Stark Bitcoin ‘Revolution’ Warning Amid Sharp Decline In The Price Of Ethereum And Other Cryptocurrencies

Fed Issued Stark Bitcoin ‘Revolution’ Warning Amid Sharp Decline In The Price Of Ethereum And Other Cryptocurrencies
Written by publisher team

Bitcoin and cryptocurrencies, after proliferating over the past decade, have ballooned into a massive $2 trillion market in recent years.

The price of bitcoin started rising late last year from under $20,000 per bitcoin, peaked at around $70,000 last month and briefly helped the common crypto market reach $3 trillion. The price of Ethereum and similar competitors has risen faster than the price of Bitcoin as investors pile into the emerging market.

Now, with bitcoin and crypto prices under pressure in the face of a hawkish Federal Reserve, one academic warned that the cryptocurrency has “lit the fire” under central banks — even if bitcoin itself may not survive.

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“As much as you may not like bitcoin, it has sparked a revolution that may benefit all of us directly or indirectly,” said Eswar Prasad, senior professor of international trade policy at Cornell University. CNBC This month, the addition of cryptocurrencies “sparked a fire for central banks to start considering digital versions of their own currencies.”

The growing popularity of bitcoin and cryptocurrencies among Wall Street investors and technology companies in recent years has prompted the Federal Reserve and other major central banks to begin exploring how to digitize their national currencies.

In 2019, social media giant Facebook

FB
, now renamed Meta, announced that it plans to launch a private bitcoin-inspired digital currency, then called libra. Governments and lawmakers have balked at Facebook’s plans to become a global issuer of coins, however, legislating Facebook’s crypto ambitions no longer exists.

This year, the Central American country of El Salvador officially adopted bitcoin as its national currency along with the US dollar and began buying massive amounts of bitcoin. Some other countries in the region are watching Bitcoin’s experiment in El Salvador and may follow suit in order to escape dependence on the dollar.

However, Prasad also warned that newer and more sophisticated cryptocurrencies that use versions of the bitcoin blockchain technology may eventually replace bitcoin entirely.

“Bitcoin’s use of blockchain technology is not very efficient,” said Prasad, author of The Future of Money: How the Digital Revolution is Transforming Currencies and Finance. Prasad, who believes that blockchain technology will be “radically transformative” for the financial services industry, said Bitcoin “uses an environmentally disruptive transaction validation mechanism” and “is not developing very well.”

Bitcoin critics have previously cited the massive energy demand of Bitcoin as one of the main reasons other cryptocurrencies could eventually replace it. Bitcoin is currently the most valuable cryptocurrency out of the thousands in existence. Bitcoin is worth about twice as much as Ethereum, which is the second largest cryptocurrency and much more than all the others.

Ethereum itself, which was launched a few years after Bitcoin, is currently fighting against competitors who claim to have developed its technology and attracted huge investments in the past two years.

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Many prominent investors agree with Prasad that Bitcoin could be exchanged for Ethereum or even a new, more radical digital currency.

Elon Musk, Tesla

TSLA
The billionaire who helped “joking” Bitcoin rival Dogecoin become a major cryptocurrency this year has repeatedly backed memecoin over the likes of Bitcoin, Ethereum and other cryptocurrencies.

Musk speaks to time magazine after his name the time 2021 Person of the Year, said last week that he believes dogecoin is more suitable for transactions than bitcoin and has “much higher potential.”

Earlier this month, billionaire investor Mike Novogratz said he expects the price of Ethereum to outperform Bitcoin as the Federal Reserve looks to tackle inflation.

“People see Ethereum as a technical bet, and Bitcoin is more of a fiat cut,” Novogratz said.

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