Currently, the craze for virtual currency is blowing around the world. The craze for virtual currency investment in Korea is starting to rise among young people, and now it is becoming a social phenomenon. Will virtual currency investment be as bright as many people think? Virtual currency is a type of unregulated digital currency, which is issued and usually controlled by its developers and used and accepted among the members of a specific virtual community. These cryptocurrencies are acquired through a virtual currency miner using a computer. Therefore, the production volume is very limited, so many cryptocurrencies have high values.
Money is like a promise made in society. Through this promise, people built an economic system that uses money instead of barter. Therefore, money must maintain a certain value to some extent. The value of money declines when inflation occurs. Inevitably, when the economy grows, the value of money declines within a certain line. However, the current virtual “currency” is different. Perhaps more volatile than the general stock market, the basis for this is Elon Musk’s support of Dogecoin and its aftermath.
Over the past month, Elon Musk has posted tweets that intensively heated Dogecoin, one of the cryptocurrencies. Thanks to that, Dogecoin’s value soared. However, on the other hand, Elon Musk announced on May 13 that Bitcoin mining was contributing to the destruction of the environment, and that Tesla would stop selling vehicles using Bitcoin. So, the value of Bitcoin plummeted from $56,000 on May 12 to $33,000 on May 23.
Although the ordinary stock market also causes severe fluctuations in the stock price when any event related to the company occurs, the average daily stock price generally maintains a certain value. However, in the cryptocurrency market, many investors react sensitively and the market price trembles by a celebrity who is just one investor, not related to the people who issue the currency and control it. So, the investors should keep in mind that the cryptocurrency market is not a very credible, stable, and well-managed market. In conclusion, this issue clearly showed the shortcomings of how volatile cryptocurrency is, that it is a risky investment market that is highly susceptible to loss even if it is invested.
By: Junhong Park