510288312 Cryptocurrency Markets & Investments Question 4 Bitcoin and other cryptocurrencies have gained major traction over the last few years with Bitcoin reaching a new all-time high of over $68,000. However, with this new all-time high, Bitcoin has dropped to around $40,000. The sharp increase in the price of bitcoin and other cryptocurrencies has been described to contain bubble-like properties. A bubble in economics is a cycle that is characterized by a rapid increase in the value of a particular item. With this fast escalation is followed by a decrease in the value which can be referred to a “bubble burst” (Kenton, 2021). A lot of cryptocurrencies such as Bitcoin, Ethereum, Cardano and more have all hit their new all-time highs in the past few months, however, since then, they have all dropped by more than 40%. As we can see with the price variations in Bitcoin and all other cryptocurrencies, we can say that cryptocurrencies have bubble-like properties, and their bubbles are being popped now. 1 510288312 In the graph above (CoinMarketCap, 2022), It is clear to see that every time over the last year that bitcoin has gained in value, a crash or “bubble burst” occurs. This burst happens specially when Bitcoin has reached a new all-time high. This happens to the other cryptocurrencies since most of them in the market follow the bitcoin trend since bitcoin is the market leader in the market. It is unsure what will happen to bitcoin in the future, but we can be expecting more bubbles to happen with the cryptocurrencies. After the bubbles seen in the graph above, bitcoin has come back even stronger which is what people are expecting to happen to Bitcoin soon. These bubbles have happened to other markets such as the real estate market. With a bubble, the same stages happen where at the start there is a boom where the value explodes to high prices and investors are happy to see it on the rise. Investors may start to take profits from the bubble but when they see a decline in the value, they may start to panic and selling out which can result in the massive decrease in the value. It is likely that we will be seeing another potential bubble in the crypto market. Bitcoin and other cryptocurrencies have been described to contain bubble-like properties which is accurate by looking at the graphs of their value. Question 10 NFTs just like cryptocurrencies have gained major attention this past year. NFT’s are non-fungible tokens that people can own that is built based on blockchain technology. Non fungible meaning a unique digital identifier that cannot be copied. It is a one-of-a-kind digital asset that can only be owned by one person. There are thousands of different NFT groups with new ones coming out each day. With these non-fungible tokens, there are benefits and challenges that we will explore. 2 510288312 There are different types of benefits that can come from NFT’s whether you are the creator of a collection or are a holder of one. For a creator, they get automatic royalties meaning that the creator or artist gets a percentage of a sale of their NFT. Each sale means that the artist will be pocketing money from it. Anyone can become a creator of a NFT collection since there is a low barrier to entry and potentially start to produce an income from it (CJEN, 2021). For holders, the benefits can be different depending on the road map of the certain collection. Some collections may offer weekly giveaways for holder, a free NFT of the creators next collection and more. One of the most famous NFT collection is the Bored Ape Yacht Club collection has 10,000 unique Bored Ape NFT’s owned by 6.2 thousand owners. Some of these owners include Stephen Curry, Neymar, Serena Williams, Eminem, and plenty more. The owners of this certain collection get to be part of the same group chat on discord. Bored Ape Yacht Club recently held a party for holders only. Different collection has different and unique benefits. One of the main benefits from NFTs is that you can flip them and make profit from them. The original mint price was 0.08eth which is about $230 USD and Stephen Curry purchased his for the price of 55eth which is currently about $156 thousand USD. This would be a massive profit for the previous owner of that certain NFT. There are practical uses for NFTs that could be beneficial for us. NFTs and real estate go surprising well together. They can be used in real estate to speed up transactions, enabling smart contracts for properties which can connect buyers and sellers quicker. NFT’s can even be used to provide proof of ownership and track the changes in the property value using timestamped NFT’s (Rean, 2021). Another practical use for them is to do with the gaming 3 510288312 industry. People’s NFTs can be integrated into different games. Instead of buying in game items, with NFTs, we can have the ability to own our own game character which will be unique and can have their own characteristics. If you bought skins on Fortnite for example, you do not really own any of them and if Fortnite shuts down, all the in-store items you may have bought will disappear. This will not happen if you own your unique NFT (Morrongiello, 2018). Another practical use for them could be to replace tickets. This could reduce paper usage since they’ll only need one token. They can even be used to represent academic credentials since they could be used to provide proof of degree earned, your grades, and more which will not be able to be altered. This could be done by issuing tokens for each course that the student has complete along with verifying any degrees earned through smart contract verification systems (Rean, 2021). While the benefits and practical uses of NFTS can be amazing, there are always challenges. One of the main ones is the cyber threats and online fraud risks. When you search up a particular collection on Opensea, you can find impersonations of the real NFT collection. These stores will look authentic since they will use the original logo. These fake stores even sell exact replicas of the NFTs (Parmar, 2021). Other challenges would be that, if you may end up spending more money of NFTs to get items for a game or character than you would for a game usually. Some characters that can be integrated into games may be too expensive as well. NFTs are an exciting new thing that has sprung to light recently. There are plenty of benefits that come with it for creators and artists and even for the owners and holders of NFTs. There are a lot of different practical uses for them as well. With these different uses and benefits there are also challenges that come with them. 4 510288312 Bibliography CJEN. (2021, October 27). 4 benefits of nfts for creators and Artists • dGEN Network. dGEN Network. Retrieved January 18, 2022, from https://dgen.network/4-benefits-of-nfts-forcreators-and-artists/ CoinMarketCap. (2022). Bitcoin price Today, BTC to USD live, marketcap and Chart. CoinMarketCap. Retrieved January 18, 2022, from https://coinmarketcap.com/currencies/bitcoin/ Kenton, W. (2021, December 30). Learn about a bubble in economics. Investopedia. Retrieved January 18, 2022, from https://www.investopedia.com/terms/b/bubble.asp Morrongiello, J. (2018, September 10). Non-fungible tokens: Future applications and challenges. Medium. Retrieved January 18, 2022, from https://medium.com/point-ninenews/non-fungible-tokens-future-applications-and-challenges-a73117efc67 Parmar , D. (2021, October 12). Challenges and risks associated with non-fungible tokens (nfts). Geekflare. Retrieved January 19, 2022, from https://geekflare.com/finance/nftschallenges-and-risks/ Rean. (2021, November 3). 10 practical NFT use cases beyond digital artworks. Hongkiat. Retrieved January 19, 2022, from https://www.hongkiat.com/blog/nft-use-cases/ 5
