The Bubble Will Likely Burst And Here's Why

Virtual currencies are unstable and unreliable. The price of these online currencies are constantly changing and are regularly used by scammers to get a quick buck. Virtual currencies are getting more and more popular; however, many people are aware of the risks of using them. Despite the industry booming and the news it is creating, the dangers of using these virtual currencies greatly outweigh the pros of using them. Virtual currencies are unstable, lack government control, and tend to be used for illegal purposes.
For starters, the price of the Bitcoin, for example, can fluctuate greatly throughout a single day. One slight change in the market and drastically alter the value of these currencies. Roubini stated this in his article “Blockchain’s

Without the government backing, the price of the virtual currencies can’t be guaranteed by them. The virtual currency economy could crash at any time and lose all value. As unlikely as it is, it is possible for the price to plummet and for everyone to lose a lot of money. Sachs points this out in his article “The Bitcoin Bubble Will Likely Burst and Here’s Why”, “Why, then, did bitcoin soar in value this past year? Why did tulip prices soar in Holland in 1636 only to plummet the next year? Why did shares in South Sea Company soar in London in 1720 before collapsing? Why did Pets.com launch at $14 a share in the dot-com bubble in 2000, only to collapse to 14 cents soon afterward? And why, perhaps, did the Dow rise by 25 percent this past year? The most likely answer is that the deep human desire for quick and easy wealth all too often ends as quick and easy despair” (p.16). He brings up all these past examples of when a certain product has soared in price only to lose almost all value. For example, all the value coming from Bitcoin is just from its hype; it is only expensive because people are making it expensive. As soon as the hype dies down, it will lose more and more value. It’s already happened once with Bitcoin, on December of 11th of 2017 Bitcoin was worth $17,000. This was a sudden price increase from the mere $1,000 it was worth at the beginning of 2017. What caused this price

Tax evasion is a big problem because the virtual currencies are tax-free. Sachs states in the same article that, “Bitcoin's anonymity is also its practical weakness. Governments insist on being able to trace financial transactions. They fight tax evasion, economic crimes, and terrorism by following the money. Some governments, of course, also monitor the activities of their political foes in the same way” (p.8). Drugs purchases off the black market are also a big problem with virtual currencies. The transfer of some virtual currencies from one person to another is not recorded in any database so there are not any records of the transaction. This makes purchasing illegal items, like drugs, a lot more simple and less risky for the person doing it. Roubini exclaims in the same article that, “Until now, Bitcoin's only real use has been to facilitate illegal activities such as drug transactions, tax evasion, avoidance of capital controls, or money laundering. Not surprisingly, G20 member states are now working together to regulate cryptocurrencies and eliminate the anonymity they supposedly afford, by requiring that all income- or capital-gains-generating transactions be reported” (p.8). Money laundering is also a big problem. This goes along with there being no records of transactions. Without any records, people are able