Cryptocurrencies..increasing demand and constant risks

Cryptocurrencies continue to gain ground as a means of buying and selling, starting with the purchase of non-fungible tokens using this currency, and the announcement of their use by global companies such as Tesla, the automobile company, to a market capitalization of $1.6 trillion.

However, experts in the digital economy have made it clear that the risks of its use are still high, unless it is subject to the oversight and recognition of government central banks.

US Federal Reserve portal

The digital expert, Mohamed Fathi, said that the spread of digital currencies is linked to the US Federal Reserve’s (central bank) recognition of them, which gives them legitimacy and oversight, and without this the matter will be subject to the decisions of each country in terms of availability or prevention.

Fathi added that so far, countries do not participate in them through government banks, and as for the companies that announced dealing, “it is their own thing, as they aspire to make a profit by investing in buying these currencies and then reselling them more, which brings them huge profits in a short time, as happened with Tesla.

big risks

The economist, Waddah Al-Taha, monitors the risks of cryptocurrencies, including the source from which they gain their value, “the currency market contains 10,200 currencies of which we know only a small number, and there are also fears that the crypto system may help in money laundering and transfers from one side to another in a way It is illegal, and it suffers from high volatility in its value during short periods, in addition to the lack of a reserve that helps in evaluating the price, and the value of the currency is derived from the demand for it only.”

Al-Taha added that a currency such as “Bitcoin” is available of 21 million coins, of which only 18 million are sourced, and its value is high due to the large number of institutions that offer to sell their products in this currency, in light of the lack of a large number of them available.

Digital expert Mohamed Fathi agreed with him, who pointed out that the prices of cryptocurrencies are changing because the process of mining and production is very slow because they are subject to complex calculations, many algorithms and long codes using large devices.

According to Youman El-Hamaky, a professor of economics at Ain Shams University in Cairo, the problem with cryptocurrencies is that they are outside the control of central banks, and those who use them are a group that has huge capabilities for mining using the “Blockchain” technology, and this puts question marks around it.

China occupies a large proportion of bitcoin mining, with 65% of bitcoin miners, followed by the United States and Russia with 7%.

volatile market

Professor of Finance and Investment in Cairo, Dr. Mustafa Badra, says that “the references to the official currency market are linked to factors such as the economic performance of the country that owns the currency, and the references to the oil market, and the situation is different in the digital currency market in which the speculative process is exacerbated, and usually the fans of its heights and promotion on It is safe for the speculators themselves.”

He adds that “the high risk rate in these currencies also comes from the possibility of human intervention directly in them, whether through transfers or activities and operations that are not regulated internationally, which explains their decline and then sudden increases.”

But there is another matter that is not known how to solve even if these coins are government recognized, and that is their energy drain. A 2018 study by the Oak Ridge Institute in Ohio stated that mining one dollar worth of bitcoin consumes 4.7 kilowatts of energy, more than twice The energy needed to mine copper, gold and platinum is worth one dollar.