crypto takes 100 trips to the moon

somewhere deep in the bowels of the NASA HQ in Washington DC, some of the brightest minds in the world are studying something very complex. no, it’s not the secret sauce that has cryptocurrencies like Doge and Shiba Inu currently valued higher than the likes of Maruti Suzuki and Nestle India. it’s the perfect approach to put a human being back on the moon. they reckon it will cost about $30 billion.

meanwhile, crypto investors keep reaching promised land beyond promised land. Bitcoin and Ethereum have recovered from their mid-year slump to soar to their early-year highs and beyond, setting new record highs and pushing the total crypto market cap beyond $3 trillion. what’s fueling their rally?

is it a hedge?

one of the triggers behind the latest rally was the formal acceptance of Bitcoin (and thus cryptocurrencies) on Wall Street through the introduction of a Bitcoin ETF. another factor is the rapid surge in inflation across the globe as the costs of pumping money into the economy and supply shortages start to surface. simply put, inflation is a rise in prices, which makes currencies weaker and reduces purchasing power. consider an example where $10 could buy 10 loaves of bread earlier but after inflation, can only buy 8 loaves of bread.

traditionally, gold was seen as one of the best hedges against inflation since it retains its value even while currencies weaken. a gold bar which cost $10,000 before inflation would fetch a higher amount, say $12,500 afterwards. Thus purchasing power is retained. with Bitcoin loosely seen as a form of “digital gold”, many are taking a punt on it in hopes of higher returns than from the yellow metal.

is it a game?

however, the volatility of crypto investments cannot be understated. while price spikes tend to be fast, their drops are furious, sometimes dipping 10-20% in a matter of minutes. for speculative investors in a “Squid Game” cryptocurrency, which lasted all of 11 days, it took just seconds to see their 310,000% gain wiped out to zero. most of the tokens were held by the creators who sold their holdings in one shot to make away with millions of dollars in what’s known as a ‘rug pull’ scam.

many analysts suggest that this may be the final push-up in Bitcoin’s current bull run before it settles into a consolidation phase next year. others, including policy makers at the Bank of England believe this surge is tied to the easy flow of money triggered by stimulus spending, and could be a bubble larger than the subprime debt that caused the 2008 global financial crisis.

whether it’s just an elaborate high-stakes game of ‘diamond hands’ i.e. who can hold their investments for the longest time or serious belief in a changing world order, there’s no doubt at this moment that cryptocurrency investors are winning. there’s still a long road ahead though, and it certainly won’t be a smooth ride.