Bitcoin

Bitcoin competes with fiat money in terms of value, but has no volume

The fact that Bitcoin, viewed as “solid money”, is a widespread refrain among many proponents of the popular cryptocurrency. With a limited supply of 21 million and a network backed by more than 120 exahashes per second of computing power, the consensus among industry commentators has often focused on becoming a global monetary superpower.

Barely a decade after existence Bitcoin’s inferred value is already the eleventh largest monetary base in the world. beginning of November Bitcoin got bigger than the Russian ruble for the first time in history.

As fiat currencies weaken under the heightened economic pressure from the coronavirus pandemic, Bitcoin (BTC) has continued its upward trend for most of this 2020. Although price fluctuations are much more volatile, Bitcoin is up 120% this year despite the Black Thursday event. A clear decline was recorded in mid-March.

Bitcoin competes with fiat money in terms of value, but has no volume
Bitcoin competes with fiat money in terms of value, but has no volume

With stimulus plans, which may include various stimulus packages, Such cash injections are expected to result in a significant devaluation of fiat currency values. When bitcoin resumes the progress forecast by numerous market analysts, Are you ready for go even higher in the global monetary record.

The full record of the history of the world reserve currency is consistent with the fact that the monetary base is going up and down. In the six monetary epochs since 1450 No currency has had global dominance for more than 110 years. With the 95-year-old US dollar remaining the world’s reserve currency, some are hoping that this is a sign that things are about to change.

Fiat currencies are weakening

Although it is the most gold-backed fiat currency in the world market, The Russian ruble now has a lower monetary base than Bitcoin. As the ruble loses more ground against the US dollar and BTC jumps to the $ 16,000 mark, 1 BTC is now equal to 1.2 million rubles. The next step for Bitcoin is to outperform the Canadian dollar. Based on your current circulating supply, A BTC move above $ 18,000 would outperform the Canadian dollar.

As previously reported, Bitcoin has already hit an all-time high against seven national currencies, including Brazil, Argentina and Turkey. Rising inflation, compounded by economic stagnation as a result of COVID-19, had a negative impact on several fiat currencies.

For now, Bitcoin’s all-time high is still at $ 19,665, which was hit during the bull run in December 2017. However, for Bitcoin to start challenging major world currencies such as the US dollar, Chinese yuan and Japanese yen, a six-digit price must be reached, according to Bitcoin John Todaro, Head of research at the TradeBlock institutional trading platform who told Cointelegraph:

“We could see Bitcoin outperform other major fiat currencies, but it depends on how the size of a forex market is measured. The New Zealand dollar (‘kiwi’) is at the lower end of the group and is the most vulnerable to being overtaken by Bitcoin. However, it currently has a daily trading volume of more than $ 100 billion, which is well above that of Bitcoin. . Unlike other solid financial investments, Bitcoin has a high trading volume. Even with a slightly higher market capitalization, the fictitious trading volume of Bitcoin could be much higher than it is today. “

Bitcoin shines when the global economy falters

The parabolic motion required to get Bitcoin to such a level would also firmly place it in the same category as gold as a consolidated store of value. Several proponents of the popular cryptocurrency already identify themselves BTC as a suitable hedge against currency devaluation and other forms of economic uncertainty.

Amid the rate cuts in 2019, Travis Kling, Founder and Chief Investment Officer of Ikigai Asset Management, He warned that the current debt position was a recipe for another global financial crisis. According to Kling, central banks endorse growth metrics to give the impression of a healthy economy. When Kling made these comments, the world was not yet affected by the coronavirus pandemic.

Bitcoin appeared frequently in discussions of possible safe-haven assets that could be used as Hedging against another global recession. Amid the panic over asset sales after COVID-19, BTC could not avoid the massive liquidation on Black Thursday. which shows that he has not yet reached this desired state. The largest cryptocurrency by market cap plunged nearly 50%, hitting a low near $ 3,800. But still, Exactly eight months later, the price of BTC has increased by more than 300%.

Commenting on the possibility that Bitcoin could hit a new all-time high in the short term, Todaro noted that it will be difficult to get sustained momentum to the top before the end of 2020, adding: “This bull cycle should take us well beyond the future All time highs Earlier, and with government spending rising and May halving, we are facing one of the most attractive bull cycles in Bitcoin history. “

Joe DiPasquale, Crypto Hedge Fund CEO BitBull Capital also sees Bitcoin hit a new all-time high during the current bull run, telling Cointelegraph: “It is very likely [que Bitcoin alcance un nuevo máximo histórico] when Bitcoin broke above $ 16,000 at the moment, which was a major level of resistance. Unless a major negative event hits the market in the short term, $ 20,000 isn’t far from this point. “

COVID-19 and Infinite Quantitative Easing

While inflation remains a real concern for many countries, 2020 was a pivotal year for supply momentum for Bitcoin. With the halving in May, the supply of new Bitcoin was halved.

In the meantime, in response to the economic stress caused by COVID-19, several governments have adopted proactive monetary policies that included injecting money through incentives. According to World Bank estimates Global gross domestic product is expected to decline by 5.2% in 2020, the largest decline in decades. In June, the World Bank presented a roadmap for countries to tackle economic problems. Specification:

“Short and long-term reconstruction measures include strengthening health systems and introducing specific incentives to stimulate growth, including private sector support and direct funding to the people. During the mitigation period, countries should focus on maintaining economic activity with support for households, businesses and essential services. “

By recording the depreciation of cash holdingsSome companies are already choosing Bitcoin as a treasury reserve asset. MicroStrategy, a company listed on Nasdaq, It hit the headlines in August when it announced the purchase of 21,454 BTC worth $ 250 million. Soon we saw more interest in the large traditional institutions, when they tried to buy bitcoin as reserve assets.

The business intelligence firm doubled its bitcoin adoption policy with an additional purchase of 16,796 BTC ($ 175 million) in September. In less than two months, the company grew in value by more than $ 160 million. The same applies to other companies that have nothing to do with the crypto space that bought BTC as reserve asset.

While Bitcoin retains certain currency-related characteristics, The lack of fiduciary supply limits makes any attempt to make comparisons between the two somewhat problematic. In this case, market capitalization may be a better metric to measure Bitcoin’s growth compared to the size of the base of other important assets, as stated by DiPasquale:

“The fact that Bitcoin outperforms fiat currencies is not a metric to focus on as fiat currencies as such have no circulation restrictions. Instead, market capitalization is a better metric, and Bitcoin is now in the top 20 assets (rankings of stocks, ETFs, and cryptocurrencies). “

The economic downturn will be difficult to reverse

In a speech on November 6th Jerome Powell, The Fed chairman has downplayed expectations of a rapid recovery from the current economic downturn: “The current economic crisis is the worst of our lives. It will be some time before we get back to the level of economic activity and employment that we had at the beginning of this year.”

Powell’s remarks echo similar warnings from the World Bank and other financial institutions. Actually, The majority believe that the concurrence of global, regional and national economic pressures exacerbated by COVID-19 will be difficult to overcome in the short and medium term.

The pharmaceutical company, Pfizer recently announced that its COVID-19 vaccine is more than 90% effective at preventing the virus. While this is good news in fighting the pandemic, market analysts say the economy is set for a downward trend whether or not a vaccine arrives.

Todaro thinks so “The stock markets are personally rating the COVID-19 vaccine as a savior for industrial and retail companies.” However, he added Good news alone will not drive economic recovery as supply and demand dynamics need to be restored. In addition, according to Todaro, several established companies are in financial distress and are likely to go bankrupt without additional government relief: “That uncertainty is now re-emerging and stock markets are facing a setback”.

With more problems ahead of us Bitcoin appears poised to receive even greater institutional attention as large investors look to alternative investment vehicles. In fact, the smart flow of money to Bitcoin already has some stakeholders predicting it BTC overtakes gold as a de facto hedge selected by institutional investors.

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