The world is in an uncertain place right now, and many are looking for what they can hopefully consider to be a “safe investment”. This may be a pipedream in the situation we are now, or there may be certain investments you can make that will protect your money better than others. As the exchange rates of Bitcoin to USD goes up, one can’t help but think it is a vote against USD.
Maybe, it is all about USD losing its usefulness?
Over the last 10 years, we have seen the expansion of monetary policy to the extreme in the United States. It was previously unimaginable for that much money to be printed so consistently for so long. But with Bernanke’s blessing, there was a huge increase in the amount of currency in circulation. Those who were for this intervention point at stock prices as an indicator of success but forget that we are not out of the storm yet.
What happens to the US Dollar?
Naysayers of quantitative easing say we did nothing more than put the economy on novocaine, and there is going to be the hangover in the future. As the Fed begins to tighten monetary policy and interest rates rise, we might be facing this problem sooner than expected. Once again, this all depends on the perspective.
Anyway, it is now possible that the USD is losing its usefulness in the world while its users realize there is too much of it on the market and regulators have too much power over its worth. Both monetary and fiscal policy can have a massive effect on the currency, and as long as this is true, it will always be risky to invest in USD.
Or, is it because of Bitcoin getting more valuable?
You can either view the BTC/USD rate shift to be good for Bitcoin or bad for USD, but many would argue that it is a sign that people are losing their faith in the banking system.
Fiat is outdated – Bitcoin era is on?
Monetary policy directly affects the market of money, or in this case, the USD. The supply of money can be increased or decreased by the Fed, and the result is a huge variability in the “value”. Fiat currencies have been a reality for a long period of time, but there has never been a viable alternative to them. There was the gold standard, but it was impractical for its own set of reasons and still controlled by a government.
Bitcoin eliminates any kind of intervention from the third party, including governments, which can make it a new independent benchmark for raising the nation’s economy. Probably, it is still far from reality, but the fact that more people are turning to Bitcoin as a store of value is undeniable. This is especially true for countries with the high-inflation environment.
How much is Bitcoin now?
There are tons of articles which talk about how much you would have earned if you had invested in Bitcoin several months or years before. As these come out, the narrative is beginning to shift and view Bitcoin as something that is being gradually accepted by the mainstream. This is generally a good thing for Bitcoin.
Bitcoin is highly volatile right now, although most of this volatility has resulted in swings upwards rather than all over the place. There are several proposed ways of reining in the volatility, but the actual answer to the problem might be to wait it out until it reaches some sort of equilibrium price with USD. As we just saw (of December 6), the price of Bitcoin broke through $12,500 and shows no signs of slowing down. At one of the leading exchanges, CEX.IO, Bitcoin price has even reached a mark of $13,000. It came as no surprise for regular traders as CEX.IO has been long known as the exchange with the most profitable rates for cryptocurrency.
As much as people view the volatility of Bitcoin and difficulty in slowing it down as a negative quality, it is actually a feature of the design. In any other currency there would have been some sort of intervention from the government by now. A regulator would have taken it into their own hands to decrease volatility, and tampering would have begun. Bitcoin does not have this luxury, and this will likely prove to be a good thing for the cryptocurrency in the long-run.
Will Bitcoin inevitably go up?
The question then becomes, how high will Bitcoin go, and will it be able to sustain its appreciation against USD. Bitcoin is a deflationary asset, meaning that it is designed to constantly increase. All this is not merely a guesswork, and the fact that Bitcoin takes an upward movement trend is proven by its price dynamics throughout the whole history. In as little as one year (take the period from December 6, 2016 to December 6, 2017) the price for this cryptocurrency increased 15-fold! News organizations have been shocked when Bitcoin broke through any perceived price ceiling, but it has now broken through $5,000 and $10,000 approximately in a year, and people seem to expect this trend to continue.
Why is it happening? The supply is limited and will become more limited, and, at the same time, demand is increasing. What is more, Bitcoin is getting widespread as a method of payment among businesses and even enjoys recognition of advanced countries, which also contributes to its surging price.
In conclusion, as Bitcoin continues to rise against USD, there are lots of factors that should be examined in regards to the USD going forward. Many articles focus on Bitcoin and what is “right” about it but forget to look at USD and what is “wrong” with it. Granted, the actual answer is somewhere in the middle, but the only way to reach a solid understanding of the overall shift in the investing space is to understand both sides.
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