Bitcoin's crazy rise and fall is due to its speculative nature.

     This Thursday, Bitcoin, which had been in a crazy month, experienced a cliff-like decline.

     After doubling since September, Bitcoin hit the $500 mark on November 4. The last time Bitcoin reached this price was in August last year. However, the speculative nature of the Bitcoin market means that it is also a highly volatile market. On Thursday morning Beijing time, the price of Bitcoin fell off a cliff, with a large amount of selling pressure pushing its price down 26% to $368.

     Bitcoin was born after the 2008 financial crisis. Investors, including ordinary people and scientists, who suffered from the global financial crisis caused by excessive money supply, became increasingly skeptical of the current monetary system. As a result, a person named Satoshi Nakamoto proposed the concept of Bitcoin in 2009. Based on the open source software designed and released by Satoshi Nakamoto and the P2P network built on it, Bitcoin is a P2P digital currency. Point-to-point transmission means a decentralized payment system.

     Bitcoin has two major features that hit the weak spots of the current monetary system: first, decentralization - there is no issuing agency, so it is impossible to manipulate the number of issued coins. Its issuance and circulation are achieved through an open source P2P algorithm, which ensures that the currency value cannot be artificially manipulated by mass production of Bitcoins; second, scarcity, the total number is very limited, and it has a strong scarcity. The currency system had no more than 10.5 million in 4 years, and the total number will be permanently limited to 21 million thereafter.

     Compared with the current currency, these two characteristics completely eradicate the basis for the central bank to create unlimited currency, or for the government to force the creation of unlimited currency, which leads to invisible inflation and invisibly plunders and devours the wealth of the people. Therefore, Bitcoin was very popular as soon as it was born and soon had a broad market.

     The fact that Bitcoin can be so popular is a great irony to the current global monetary system, and it has caused central banks of various countries to reflect deeply on the current monetary system. Around 2013, Bitcoin developed very rapidly, which once made central banks of various countries feel like they were facing a great enemy, and even began to impact the current currency issuance system, and calls for replacing the current global monetary system were everywhere. In addition, some countries began to allow real currency to be exchanged for Bitcoin, and some influential financial tycoons such as Li Ka-shing invested heavily in Bitcoin, which made some countries afraid. For example: Joe Manchin, a Democratic senator from West Virginia, sent an open letter to multiple regulatory departments of the U.S. federal government on February 26, 2014, hoping that relevant agencies would pay attention to the current situation of Bitcoin encouraging illegal activities and disrupting financial order, and asked to take action as soon as possible to completely ban the electronic currency.

     It is undeniable that the advantages of Bitcoin hitting the weak spot of current currencies were hyped up and exaggerated by some speculators in order to speculate and profit on Bitcoin, which made Bitcoin hyped up to the extreme. After the central banks of various countries banned Bitcoin, the price of Bitcoin fell sharply. After falling below $200 in January this year, the Bitcoin market fell into silence. However, since September, the Bitcoin market has suddenly started to take off, rising by 100% in one month.

     The current rise of Bitcoin is mainly driven by blockchain technology. As a derivative of blockchain technology, Bitcoin has attracted the attention of many investment banks and financial institutions for its authenticity and transparency. Recently, major investment banks and many financial institutions around the world have been paying attention to blockchain technology, which itself was developed from the Bitcoin market. This expectation has a certain support for the demand for Bitcoin. In addition, the positive news that the European Union recognizes Bitcoin as a currency and exempts it from VAT may also be an inducement. In addition, the strengthening of capital controls by the Chinese government may stimulate the rise in the value of Bitcoin, because some wealthy people want to use Bitcoin to transfer RMB out of China.

     But no matter what the reason, this round of Bitcoin price rise is still related to speculation. The above reasons are just to find reasons to continue speculation. As long as it is speculation, there must be bubble risks behind it. Bubbles will always burst and risks will always be exposed. Investors must be sober, pay attention to the investment risks of Bitcoin, and try not to get involved in this investment product.