“Bitcoin has no intrinsic value, but neither does government-issued paper money. The market should determine its value, while government should focus on disclosure, education, fraud prevention, and curbing its use to support criminal activities.” – Sheila Bair, who headed the FDIC during the dark days of the 2008 financial crisis
Ten years ago, Bitcoin was a research paper about a new type of digital money. Five years ago, most people outside tech hadn’t heard about Bitcoin. Today, things have changed. Unless you are marooned on a desert island, you’ve heard about Bitcoin.
Just about every financial, tech and mainstream media you read, will have some story about Bitcoin and cryptocurrencies. In the last thirty days:
- Trump tweeted about Bitcoin
- Fed Chairman Powell admitted Bitcoin might be a store of value
- US Treasury Secretary called a special press conference to discuss Bitcoin
- David Marcus testified in front of Congress about Facebook’s Libra for two days
- The G7 meetings discussed the threat that Libra poses to global financial stability
This week Bitcoin flew past $11,000, for the first time in 3 weeks. Since December 2017, Bitcoin’s dominance again is almost at three quarters of the market. At $205 billion, Bitcoin’s market capitalization is 69% percent of the total cryptocurrency market.
The global economy is not all sunshine and rainbows. Throughout the world, there are alarming warning signs that consumers are being overburdened with debt. Consumer debt in the United States in the last quarter of 2018, hit $4.1 trillion. During 2017, U.K. household debt surged to levels not seen since the 1980s.
The Fed’s rate cut, the trade between the US and China, capital controls in China, economic sanctions on Iran and Turkey, as well as hyperinflation in Zimbabwe and Venezuela are some factors that are prompting investors to consider Bitcoin.
The devaluation of China’s currency is rattling global financial markets. With Trump officially declaring China a currency manipulator, investors are moving their money into Bitcoin and gold.
With the currency wars flaring and global crisis on the horizon, it’s becoming apparent that investors are considering Bitcoin as a hedge.
But these are not the only reasons for Bitcoin’s price drive. Indexica points to some other reasons A study by the company showed three main drivers: a more complex conversation surrounding Bitcoin, fewer concerns about fraud and a shift in the tense of how Bitcoin is talked about from the past to the future.
In a recent series of tweets, Josh Rager, a well known crypto trader, made a bold prediction saying, once the BTC price breaks the $11,700 resistance, it will find minor resistance and reach new highs that we have never seen before. He concluded that the next upwards cycle could lead the price to surge as high as $80,000 over the next three years.
Bitcoin Rate of Return Each Market Cycle
(Each cycle had a 20% return of the previous cycle)
2011: Return of 318,864% = $31.90 High
2014: Return of 58,474% = $1,177.19 High
2017: Return of 11,960% = $19,764.51 High
2022: Potential Return of 2,392% = $78,500.00 Potential High pic.twitter.com/7KP439cpZE
— Josh Rager 📈 (@Josh_Rager) May 14, 2019
When the next financial crisis hits, one thing will be different. This time we have Bitcoin and other cryptocurrencies. In the financial crisis of 2008, the available alternative assets were gold, silver, and real estate. This time around, there’s a whole slew of alternative digital assets.
In 2019, we have several legitimate and reputable digital options, that are widely-used with high market caps: Bitcoin, Ethereum, LiteCoin, Bitcoin Cash, Ripple, Stellar and Dash.
In recent months, the rising prices of cryptocurrencies indicate that more and more investors, small and big, see cryptocurrencies as an opportunity to hedge against the upcoming fiat crash. Given Bitcoin’s high demand and limited supply, it’s a far better hedge than gold.
Bitcoin was born out of the financial crisis. In 2008, nations bailed out financial institutions. The next crisis, given consumer and national debt, will be about whole nations being bailed out. While the US can print more dollars to bail itself out, at the cost of destroying the purchasing power of its citizens and any USD holders, the citizens of other countries like Venezuela, Argentina, and Turkey will turn to alternative means of exchange, like Bitcoin and other cryptocurrencies.
Bitcoin offers an alternative to fiat currency. Yes, it is volatile right now. But with fiat currencies, governments can print more money, cause inflation and greatly reduce consumer power. Bitcoin is not controlled by any government, capital controls cannot be imposed, and it can be freely used across borders. Bitcoin is a decentralized network with fixed supply of 21 million coins that cannot be hyperinflated.
When the next global economic crisis comes, Bitcoin will play an integral role. The crisis will probably tigger Bitcoin going mainstream, if not becoming the world’s single reliable currency.
Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday and has no positions or commercial relationships with the companies or people mentioned and is not receiving compensation for this post.
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