Why Is Everyone Talking About Crypto?

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MUNner’s Daily

8 min readJun 20, 2021

What is cryptocurrency?

To understand what cryptocurrency is, you have to understand the keywords linked to its definition. Here’s my best attempt at putting it all together in one sentence.

A cryptocurrency is a virtual, secure, and decentralized medium of exchange based on blockchain technology.

Virtual currency: A type of unregulated digital currency that is only available in electronic form.

Secure: Cryptocurrency is secured by cryptography. Cryptography is the mathematical and computational practice of encoding and decoding data. Cryptography is what makes it nearly impossible to counterfeit or cheat the system by double-spending.

Decentralized: Decentralized simply means that they are not issued by any central authority. As a result, cryptocurrency is immune to government control and interference.

Blockchain: It is a decentralized, distributed ledger that makes the history of any digital asset unalterable and transparent. By design, the data on the blockchain simply cannot be modified which is what makes it secure.

Now that the definition is out of the way. I could get into the technical details about how it works and I’m sure there are plenty of resources that explain how cryptocurrencies work, but this article talks more about how cryptocurrency has become the talk of the town.

If you are genuinely interested in understanding how cryptocurrencies work, I will link the video I found most useful which answers most of the questions you might have as well. I can vouch for this video as even my mom could make sense of it without needing further explanation.

The Crypto Chatter

Let’s try and understand why cryptocurrencies have been hogging media coverage recently.

If you take a look at the interest over time in cryptocurrency, it peaked between May 16 and May 22 in 2021.

One interesting observation I noticed was the eerie correlation between the google search trends and the price of bitcoin.

Crytpo has been around for quite a while but it recently gained a lot of traction and public attention because of something called the bandwagon bias which refers to the tendency people have to adopt a certain behaviour, style, or attitude simply because everyone else is doing it.

Here are some of the major news stories that made the headlines when it comes to crypto:

The Story of Dogecoin and the Dogefather

Let’s be real, if you’ve heard of Bitcoin then chances are you’ve also heard of dogecoin. The cryptocurrency that started out as a joke has gone for a wild ride this year, Reaching an all-time high of $0.73 on May 8, 2021, from a measly $0.004 on January 1, 2021. To give you an idea of just how insane that is, Doge was worth more than the Ford motor company.

One major contributor to dogecoin’s global popularity in more recent years is its growing list of influential celebrity endorsers like Snoop Dogg and Lil Yachty.

The most notable celebrity endorser of dogecoin, however, is the Dogefather himself, Elon Musk.

Musk’s ability to dramatically influence the crypto market through social media posts even came to be known as the “Elon effect.”

In an unexpected or maybe completely expected turn of events (It’s crypto, literally anything can happen) Dogecoin plunged nearly 30% during Elon Musk’s SNL appearance.

“Buy the Rumor, Sell the News”

Every single one of Elon’s tweets would shake up the market a bit, that people started trading based on Elon’s tweets. If you think you could try your own hand at making some quick bucks using this get-rich-quick scheme, you probably have a lot of cash to spare or you like to gamble a lot. By the time you get the news about Elon’s next hot take on crypto, it would’ve already been too late. (That’s why I have notifications on ;) )

Seeing the influence of his words on the price of cryptocurrencies as a whole raises the obvious question about price manipulation.

In February, Tesla purchased $1.5 billion in bitcoin, helping send prices to a then-record high. Tesla then sold about 10 per cent of it to the tune of $101 million according to its first-quarter earnings report. The sale made it possible for Tesla to turn a record profit. Basically, Tesla made more selling bitcoin than cars.

The 2021 crypto crash

The crypto crash on 21 May 2021, wiped out about $1 trillion in market value from $2.5 trillion just the week before the crash.

There were 2 major reasons behind the crash

Tesla’s sudden decision to stop car purchases using Bitcoins, a measure they announced a couple of months back. The company cited environmental concerns over the computational ‘mining’ process behind its move.
China’s crackdown on mining rigs across the country. China reiterated a warning that it intends to crack down on cryptocurrency mining as part of an effort to control financial risks

Environmental concerns of Bitcoin mining

Many sceptics and environmentalists have raised concerns about the energy consumption of cryptocurrency mining, which may cause increased carbon emissions and climate change.

Bitcoin and other proof-of-work cryptocurrencies require large amounts of energy, due to the computational power needed for mining. According to estimates by BBC, ‘Bitcoin consumes as much energy in one year as the country of Argentina.’ Around 121 Terawatt-hours of electricity every year.

Curious to know how much power traditional banking systems consume?

For a traditional banking system, the use of data centres, operating bank branches and running digital payments networks including card systems and ATMs consume the maximum power in the chain. Most of the energy used by Bitcoin is from computing devices that are mining the currency. In comparison, the banking systems consume 263.72 TWh/yr of power while gold mining consumes around 240.61 TWh/yr.

Just thought I’d throw that figure in the mix, you are free to draw your own conclusion from it.

Global financial institution’s outlook on crypto

Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and individuals.

They recently published a research note on cryptocurrency stating that bitcoin has become an investable asset, a complete U-turn on its previously pessimistic sentiment of cryptocurrency as a potential institutional asset class. They were also careful to emphasize on utility and benefits of blockchain technology with special emphasis on Ethereum-based cryptocurrencies.

India’s position on crypto

Cryptocurrencies are not illegal in India. So if you want to buy Bitcoins, you can do so and start trading them. In fact, just recently the Reserve Bank of India (RBI) issued a clarification stating that commercial banks cannot quote its now-invalid April 2018 crypto banking ban to deny services to customers involved in digital assets dealings. You still won’t be able to purchase goods or items in the real world, but you can keep the bitcoins you buy as a store of value.

Anonymous threat to Elon

Anonymous, a hacktivist collective known for its various cyber attacks against several governments and corporations, recently threatened Elon Musk for showing a clear disregard for the average working person and that his “public temper tantrums” have liquidated the dreams of hardworking individuals.

Elon Musk did what he does best, take the matter to Twitter and respond with yet another meme.

El Salvador adopting bitcoin as legal tender

El Salvador became the first country in the world to adopt bitcoin as legal tender after Congress approved President Nayib Bukele’s proposal to embrace the cryptocurrency, a move that delighted the currency’s supporters.

Fun fact: El Salvador is among the few countries in the world that don’t have their own fiat currency and uses the US dollar as a legal tender and now, well, you can add bitcoin to the list.

Just in case you’re wondering where on earth El Salvador is actually located, it’s located in Central America.

The Future of Cryptocurrency

Cryptocurrency will be seen as a store of value, and not as a currency or as a mode of payment. Several governments have already imposed bans and restrictions. However, this could change as we just saw El Salvador accept bitcoin as legal tender. Who’s to say that other countries won’t follow up?

The idea that bitcoin will entirely replace the existing traditional financial system is a bit difficult to comprehend. A more practical thought process would be to picture the co-existence of the two. Seeing how something as simple as a tweet can alter prices, regulatory frameworks will have to be set up in order to provide protection against such vulnerabilities. Another factor to consider is that not all cryptocurrencies are to be taken seriously, meme coins like Dogecoin and Shiba Inu are inferior to their technologically superior counterparts like Cardano or Etherium. Implying that at a certain point in time, some cryptocurrencies might not be allowed to be part of the system.

There is no doubt that digital currency is the future. You don’t count the cash in your wallet when you buy your favourite items on Amazon, you make use of credit/debit cards or use a form of internet banking to carry out the transaction. I personally use my phone to buy groceries as most stores accept UPI (Unified Payments Interface) as a form of payment.

It’s very likely that by the end of this decade, physical wallets will be a thing of the past and we will live in a cashless society with money being stored on our smartphones, but that money is unlikely to be just crypto.

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