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Inflation game: bitcoin can compete with legal currency in value, but the trading volume is insufficient

Time : 10/05/2022 Author : w5bkr8 Click : + -
        Among many supporters of popular cryptocurrencies, bitcoin is regarded as a "great currency". The limited supply of bitcoin is 21million pieces, and the computing power of more than 12billion hashes per second to ensure its network security. The consensus among industry commentators usually tends to be that bitcoin will become a global super currency. Bitcoin is only 10 years old, and its speculative value is already the 11th largest base currency in the world. In early November, the circulation market value of bitcoin exceeded the Russian Ruble for the first time in history. Although the French currency depreciated under the economic pressure intensified by the coronavirus pandemic, bitcoin has maintained an upward trend for most of 2020.
        Although the price of bitcoin fluctuated violently and plummeted on Black Thursday in mid March, bitcoin has risen by about 120% year to date. As the economic recovery plan may involve a large number of economic stimulus programs, it is expected that this cash injection will lead to a sharp depreciation of the French currency. If bitcoin follows the parabolic upward trend predicted by many market analysts, it will be ready to rise further in the global base currency. All the historical records of the world reserve currency have always been consistent with the rise and fall of the base currency. In the six currency ages since 1450, no currency has maintained its global dominance for 110 years.
        Given that the US dollar has been the world's reserve currency for 95 years, it is hoped that this indicates that the situation may change soon. With the further depreciation of the ruble against the US dollar and bitcoin breaking through the US $16000 mark, 1btc is now equal to 1.2 million rubles. The next goal bitcoin will surpass is the Canadian dollar. According to the current circulation supply, if the price of bitcoin exceeds 18000 US dollars, it will exceed Canadian dollars. As previously reported, bitcoin has exceeded the record high prices of currencies in seven countries, including Brazil, Argentina and Turkey. The economic stagnation caused by covid-19 has exacerbated the rise in inflation, which has had a negative impact on these legal currencies.
        So far, the highest price of bitcoin in history is still $19665 during the bull market in December 2017. However, according to johntodaro, head of research at tradeblock, an institutional trading platform, bitcoin needs to reach six digit prices to start challenging major global currencies such as the dollar, the renminbi and the yen. He said to cointegraph:. "We can see that bitcoin exceeds other major legal currencies, but it depends on how people measure the scale of the foreign exchange market. The New Zealand dollar is at a low level in this kind of currency, and it is the easiest to be surpassed by bitcoin, but the current daily trading volume is more than US $100billion, much higher than bitcoin.
        Unlike other hard currency assets, the trading volume of bitcoin is indeed very high, so even if the market value is slightly higher, the nominal trading volume of bitcoin may be much higher than now. ". The parabolic rise pushes bitcoin to such a high price, which will also firmly put bitcoin and gold in the same category &mdash& mdash; It is a real means of asset value storage. Several supporters of popular cryptocurrencies have seen bitcoin as a suitable tool to hedge against currency depreciation and other forms of economic uncertainty. Traviskling, founder and chief investment officer of ikigai asset management, warned that the debt situation at that time could trigger another global financial crisis when interest rates were cut in 2019.
        According to Kling, the central bank is supporting growth indicators to paint signs of a healthy economy. When Kling made these comments, the world had not been affected by the coronavirus pandemic. Bitcoin often appears in discussions about safe haven assets that may be used to hedge against the risk of global recession. In the asset selling panic caused by novel coronavirus, bitcoin failed to escape the large-scale liquidation of "Black Thursday", which proves that it has not reached an attractive position. The price of cryptocurrency, the largest by market value, fell by nearly 50% to about $3800. However, after eight months, the price of bitcoin rose by more than 300%.
        When talking about the possibility that bitcoin may reach a record high in the short term, Todaro said that it is difficult to continuously push bitcoin to a record high before the end of 2020, He further added: "from a longer-term perspective, this bull market cycle should bring us far more opportunities than previous times, and with the increase of government expenditure and the halving in May, we are already in one of the most attractive bullish periods in bitcoin history.". Joedipasquale, CEO of encryption hedge fund bitbullcapital, also believes that bitcoin will hit a record high in the current bull market.
        He told cointegraph: "bitcoin is likely to reach an all-time high, because it has now exceeded $16000, which is a key resistance level. It is not far from $20000, unless there is major negative news affecting the market in the short term.". Although inflation is still a real concern for many countries, 2020 is a key year for bitcoin in terms of supply. Bitcoin halved in May, halving the daily supply of new bitcoin. At the same time, some governments have adopted active monetary policies, including injecting stimulating cash into the market, to cope with the economic pressure caused by covid-19.
        According to the estimation of the world bank, the global GDP is expected to decline by 5.2% in 2020, which is the largest contraction in decades. As early as June, the world bank formulated a road map for countries to deal with economic problems, which pointed out:. "Both short-term and long-term reconstruction policies need to strengthen health services and take targeted stimulus measures to help restore growth, including support for the private sector and direct funding to people. During the mitigation period, countries should focus on maintaining economic activity and providing support to households, companies and basic services.". Aware of the decline in the value of cash held, some companies have begun to use bitcoin as a reserve asset.
        In August this year, MicroStrategy, a NASDAQ listed company, announced the purchase of 21454 BTCs (worth $250million at that time), which made headlines. As large traditional institutions sought to buy bitcoin as a means of reserve, they soon generated more interest. The business intelligence company bought 16796 BTCs (US $175million) in September. In less than two months, the value of BTC held by the company increased by more than US $160million. Other non encryption companies that buy BTC as reserves can do the same. Although bitcoin retains some characteristics related to money, there are problems in any attempt to compare the two because there is no upper limit on the supply of legal currency.
        If so, perhaps the market value is a better parameter to measure the growth of bitcoin compared with other major infrastructure assets, as dipasquale said:. "Bitcoin surpassing legal currency is not an indicator that we should pay attention to, because legal currency itself has no circulation restrictions. On the contrary, market value is a better indicator, and bitcoin now ranks among the top 20 assets.". In his speech on November 6, Federal Reserve Chairman jeromepowell underestimated the expectation of a rapid recovery from the current economic contraction: "the current economic downturn is the most serious in our history. It will take some time to recover to the level of economic activity and employment at the beginning of this year.
        ”。 Powell's speech was similar to similar warnings issued by the world bank and other financial institutions. In fact, it is generally believed that COVID-19 has exacerbated global, regional and national economic constraints, which is difficult to reverse in the short and medium term. Pharmaceutical giant Pfizer recently announced that its covid-19 vaccine was more than 90% effective in preventing the virus. Although this progress is good news to fight the pandemic, market analysts said that no matter what the vaccine is, the economy is bound to decline. Todaro said, "the stock market regards covid-19 vaccine as the Savior of industrial and personal retail companies." However, he added that the good news alone will not promote the economic recovery, because the economic recovery needs to re-establish the relationship between supply and demand.
        In addition, according to Todaro, many established companies are in a bad financial situation, and they are likely to go bankrupt without additional government assistance: "this uncertainty has begun to reappear now, and the stock market has also experienced a correction.". With more difficulties coming, bitcoin seems to have attracted the attention of more institutions, as well funded players are looking for alternative investment tools. In fact, the smart money flowing into bitcoin has made some stakeholders predict that bitcoin will challenge the position of gold as a hedge asset that institutional investors actually choose. As a blockchain news information platform, the information provided by cointegration Chinese only represents the author's personal views, has nothing to do with the position of cointegration Chinese platform, and does not constitute any investment and financial advice.
        If you need to reprint, please contact the relevant Chinese staff of cointegraph.
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