Have you ever heard the expression that says, ‘Not all that glitters is gold”? This also applies to the Crypto side of things. Right now Bitcoin, which once used to bathe in beautiful Cryptonic sunshine, is starting to lose its’ luster and magnificence.
Things are changing. The world is changing. And sadly, some of these changes will have a dire negative effect on Bitcoin’s value as well.
This Is Why Bitcoin May Collapse
Kyle McDonald, an independent researcher, predicts that the Bitcoin network may be “regulated away,” causing the price of bitcoin to collapse.
He recommends selling bitcoin now. The reason is that after the Ethereum blockchain switches to a drastically less energy-intensive method of validating transactions, known as “proof-of-stake,” investors and regulators may realize that the energy-intensive method that both Bitcoin and Ethereum use now, called “proof-of-work,” was never really necessary.
Speaking on CoinDesk TV’s “First Mover” program on Friday, McDonald cited the “climate crisis” and Bitcoin’s massive use of energy. He said that because “Bitcoin doesn’t have the coordination like Ethereum to leave proof-of-work,” it could be “the first to be regulated away.”
Mining Crypto Has Massive Energy Consumption Challenges
Crypto’s energy consumption has become a major bone of contention for environmental activists and governments, and McDonald said bitcoin will never see “$69,000 again.” The cryptocurrency traded close to that mark last November.
McDonald said the possibility of Ethereum cutting energy costs by 99.95% is “highly realistic.”
“When you’re moving from a system that is about generating as many random numbers as fast as possible with 10 million [graphic processing units] across the world, to a system that’s running on a few thousand computers that are pretty low energy, it’s going to make a huge difference,” McDonald said. Graphic processing units, or GPUs, are used in cryptocurrency mining.
‘The Merge’ Blockchain Does Not Require As Many Computers
Ethereum’s switch, a software update called “the Merge,” is expected to happen this month, and one expected benefit is that not as many computers will be required to keep the blockchain going.
To track Ethereum’s energy movement, McDonald created the Ethereum Emissions tracker, which takes a bottom-up approach, but doesn’t factor in Ethereum’s price or the price of electricity, according to McDonald’s website.
“I’m starting with the hash rate, then looking at the hardware and making a technical argument for how much electricity must be used,” he said.
NFT Duplicate Risk
One risk, however, relates to non-fungible tokens (NFTs), McDonald said. That is, “there’s a good chance some miners are going to switch to proof-of-work temporarily after the Merge happens.”
If the miners do in fact switch, there could be duplicates of NFTs for a short period of time on another chain, he said. If that were to happen, it could “potentially even dilute their values.”
But OpenSea, the world’s largest NFT marketplace, said it would support only the proof-of-stake chain and added that it has been preparing for the transition in order to make sure the “process runs smoothly.”
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
