Bitcoin (BTC) and other digital currencies started gaining popularity last year following the big tech companies’ interest in blockchain technologies. Moreover, cryptocurrencies’ ability to execute transactions semi-anonymously has added to the popularity. Consequently, people who want their transactions to be hard to trace enjoy the secrecy these digital currencies offer.
According to researchers from the University of Sydney, almost 44% of Bitcoin transactions were used for illegal purposes and 25% of all traders used Bitcoin for illicit reasons. The research further shows that these Bitcoin traders are expected to make close to 36 million transactions each year.
“Our paper suggests that a significant component of the intrinsic value of bitcoin as a payment system derives from its use in facilitating illegal trade,” the researcher said.
The researchers’ findings certainly seem true. The total market capitalization of cryptocurrencies has declined from $830 billion to around $550 billion in the last couple of weeks, driven down by regulatory concerns that may, in part, be resulting from this illegal activity.
Bitcoin is currently selling at $10,922 after briefly dipping below the $10,000 mark on regulatory worries last week. The latest selloff has reduced Bitcoin’s total market capitalization to $183 billion, down significantly from the all-time high of $330 billion.
On the other hand, several fund managers believe the movement in Bitcoin price is purely based on speculation and that the coin does not have any underlying value or future fundamentals.
The chief executive of Vanguard, Tim Buckley, said, “Bitcoin’s value is based off scarcity, an artificial scarcity that’s out there.” He further added, “It’s really tough to imagine where the long-term returns come from, other than speculation.”
Ripple (XRP) is among those cryptocurrencies that are likely to create its own underlying value. Ripple continues to make partnerships with payment services companies to improve their transaction time and reduce the transaction charges. After the announcement of the partnership with MoneyGram, IDT Corporation and Mercury FX are planning to use Ripple’s xRapid product for certain transactions.
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