What does the future hold for Bitcoin?

ECONOMY

Since the beginning of October, the cryptocurrency has recorded a 50% increase, climbing up to $ 16,000 - The uncertainties related to COVID add to the charm of the finance of the future - Some experts do not rule out other increases

What does the future hold for Bitcoin?
© CdT / Archive

What does the future hold for Bitcoin?

© CdT / Archive

In 2017 bitcoin had conquered a respectable role in the economic news thanks to a spectacular performance. To tell the truth, apart from the speculative euphoria no one had actually understood why: its unclassifiable because it cannot be defined as a currency (even if it is called cryptocurrency) and because it does not represent any type of asset. It is also difficult to understand because it is a number that is the result of complicated algorithmic calculations, carried out by computer plantations where energy costs less.

Mysterious because it is still not known for sure who invented it. But anyhow, in twelve months it had gone from $1,000 to

$20,000. Then it suddenly fell, ending 2018 at around $3,000 and at the same time losing much of its popularity to then start rising again, albeit with great volatility. 2020 has so far been a lucky year: from around $ 7,000 in January it has risen to exceed the levels of $16,000 in the last few days, grinding a nice jump of 50% only since October.

Like three years ago, shedding light on these market movements is not easy. Many bitcoin investors argue that the cryptocurrency serves as a store of value in times of uncertainty and difficulty, such as gold or the franc. However, its level of protection is not indisputable: when the pandemic plunged global stock markets in March, bitcoin lost more than 45% in value, gold just 12%.

Protection tool

A second argument dear to bitcoin advocates is protection from inflation risks and the dollar’s loss of value. In fact, in response to the pandemic, central banks reacted by intensifying even more the already massive expansionary monetary policy interventions. However, experts are divided on the degree of protection that bitcoin can give: the cryptocurrency is too young to understand its mechanisms in the long term (it was launched in 2008) and its price is volatile. Furthermore, the problem with central banks is that after ten years of effort inflation is struggling to emerge, and with the current crisis, deflation is feared.

A limited quantity

However, it should be emphasised that unlike the ‘fiat’ currencies, the units of this cryptocurrency are not infinite: those who invented bitcoin have established that there will be at most 21 million units in circulation (today there are about 18.4 million). To avoid extracting them all too quickly through the algorithms, every four years the halving of the quantity of new units produced has been planned. In May there was the third halving, after that of 2012 and 2016. Given that both 2013 and 2017 were very positive years for cryptocurrency, it is likely that this time too the slowed pace is giving a good boost. to quotations.

A third factor behind the rally would be high-calibre investors, who, according to data from Google Trends, are currently taking more interest in bitcoin than the people of the web. In mid-October, the digital giant PayPal decided to include cryptocurrencies (such as bitcoin, litecoin and ethereum) in payments for its pool of 346 million users worldwide. Prior to PayPal, competitor Square (founded by Twitter creator Jack Dorsey) had bet on bitcoin and achieved stellar growth in the cryptocurrency sector. The Facebook Libra project seems to be definitively dead but there are also governments that are grappling with the creation of cryptocurrencies: in the lead China, the USA and also a working group led by the Bank for International Settlements (which also includes the SNB). In reality, central banks are mainly working on creating ‘digital currencies’. They are different from cryptocurrencies because they must have all three functions of currency (means of payment, store of value, unit of account) and are unlikely to ever be issued in a decentralized or anonymous way. However, the technology developed by the alleged founder of bitcoin Satoshi Nakamoto is so interesting that central banks are studying it to apply it to the currencies they manage.

Of supply and demand

And we come to the fourth (probably not the least) reason behind the bitcoin rally: the queen of cryptocurrencies represents all the charm of participating in the finance of the future. Technological, decentralised and therefore disconnected from central power, ideally anonymous. It is no coincidence that it was born in the year of the terrible subprime crisis, which in addition to highlighting the criticalities of the global financial system also generated a crisis of confidence in central banks. Now we are in the midst of another crisis, which among other things is pushing us to be an even more digital and decentralised society, and which, like all crises, does not help us to be more confident.

So where will the price of bitcoin go? There are those who expect a drop towards $ 10,000 nearing the end of the year and those who bet on an increase to $ 100,000 for Christmas 2021. The simplest conclusion, however, is given by the Economist: ‘Bitcoin has no intrinsic value, it doesn’t even have a dividend stream on which to build a valuation. However, if you believe it has a future, you may want to buy some. If so many think so, the price goes up. Its main advantage in fact is that it represents a small club, and that it is scarce. And scarcity is one of the main characteristics of things that have value for us’.

©CdT.ch - Riproduzione riservata
Ultime notizie: OnTheSpot
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