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As of October 2020, each bitcoin was worth $10,544. In April 2021, the cryptocurrency star had reached as high as $62,000. In seven months, investing in this instrument produced returns of 488%, but it didn’t stop there. By November it had reached $68,990 and there was talk of reaching $100,000. In the air was the certainty that the biggest mistake was missing the opportunity to buy cryptocurrencies.

The bullish momentum stopped in November and since then we have seen a major correction of more than 50 percent. On January 24 it fell below 33,000 dollars and the day after Black Monday there was a respite that does not calm doubts: What’s next?

Winter is coming, cryptocurrency market chroniclers tell us. In this sentence it is noted that they know Game of Thrones, but also that they are aware of what happened at the end of 2017 and the beginning of 2018, when the price of bitcoin fell more than 80% and was left at 3,100 dollars. That was a winter that lasted more than a year for the currency invented by a character that no one has seen, the mythological Satoshi Nakamoto.

Winter in the universe of cryptocurrencies means a brutal drop in price and a drastic reduction in the number of operations. This has not happened. The interest of some investors is still there, as is well exemplified by Salvadoran President Nayib Bukele, who this week announced the acquisition of more bitcoins, because he feels or thinks that the price drop is a great investment opportunity.

Will a rebound or winter come? If we take 2018 as a reference, more declines would be missing to equal the 80% collapse experienced in that year. The next resistance is at $30,000 and from there on there are several steps: $25,000, $20,000…

2022 is not 2018, when we talk about cryptocurrencies. The market has developed a lot, it has grown quantitatively and qualitatively. It now has the participation of many financial institutions, in addition to hundreds of thousands or millions of investors. Falls mean many things, among them they are an opportunity to tidy up something that grew with the speed and characteristics of a tumor.

Bitcoin and cryptocurrencies are no longer a novelty. There is now a better understanding of the opportunities and risks that these creations represent. The myth that it is a kind of digital gold, an almost certain store of value in times of uncertainty and inflation, is rapidly being dismantled. Due to its behavior in the market, it is an option for investors who have the stomach and the portfolio to withstand sudden movements in value.

Cryptocurrencies have become an entelechy worth between one and two trillion dollars. This is much larger than the GDP of Greece, Argentina, Portugal, Mexico or Spain. This volume and the way they work implies a risk for the financial stability of the world, or at least of some regions. They are also a challenge for the State and the conduct of monetary policy. Something difficult to tolerate for some governments. In September, the ban on its mining and use was decreed in China and this week in Russia. The United States is expected to announce in February the guidelines for what will be its State policy regarding digital currencies.

There will be days of turmoil for digital currencies. Perhaps winter will come. Nobody knows if in mid-2022 it will be at $12,000 or back at $69,000. Elon Musk can take this risk and put another adrenaline rush into his life. El Salvador no, nor thousands of people who were interested in this phenomenon and put their heritage there. What will happen in the real world if this virtual bubble bursts?

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Luis Miguel Gonzalez

General Editorial Director of El Economista


Degree in Economics from the University of Guadalajara. He studied the Master of Journalism in El País, at the Autonomous University of Madrid in 1994, and a specialization in economic journalism at Columbia University in New York. He has been a reporter, business editor and editorial director of the Guadalajara newspaper PÚBLICO, and has worked for the newspapers Siglo 21 and Milenio.

He has specialized in economic journalism and investigative journalism, and has carried out professional stays at Cinco Días in Madrid and San Antonio Express News, in San Antonio, Texas.

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