Cryptocurrencies Part 4

 

How long can Bitcoin be "crazy"? 

Last week we made it clear that Bitcoin is worth investing in, however, Bitcoin as an emerging asset also has some risks: as institutions bring in large amounts of funds and further development of financial derivatives such as Bitcoin futures, the price of Bitcoin remains unchanged. There is a risk of violent fluctuations; the regulatory level of various countries is becoming increasingly tight, and the government's supervision and crackdown on anti-money laundering, tax inspections, and fiat currency transactions are also increasing. Therefore, how to treat Bitcoin rationally and whether it should be investor has become a topic of discussion today. 

Decentralization, non-tampering, traceability of data, low transaction costs... the various characteristics of Bitcoin and the myth of "realising the freedom of wealth through speculation" attract retail investors. 

Barron’s: What will be the best investment opportunity coming out of the pandemic?
In an interview with Barron's, Neil Ferguson said that if someone asked in early 2020, "The upcoming new crown pneumonia is extremely destructive to the world. should i choose gold or Bitcoin as a safe haven asset?" At that time it is definitely wise to choose Bitcoin, because gold's gain is only 21%, and Bitcoin's rate of return is an order of magnitude higher than that of gold (Bary, 2020).

Many people remain cautions or completely bearish on Bitcoin
Bitcoin has only been born for 8 years. To this day, its volume is only more than 70 billion U.S. dollars, but its attention and hype have far exceeded its ability to bear. A large amount of speculative funds poured into the Bitcoin market, manipulating the price of Bitcoin up and down, with great volatility. Many economists take it for granted that Bitcoin is an economic bubble. So what is economic bubble? A bubble is an economic cycle characterised by a rapid rise in market value, especially asset prices (Kenton, 2020). Therefore, when the value of a commodity is far from being recognised by people, and the price is far lower than its actual value, even if the price has been skyrocketing, even if there are high fluctuations, it cannot be a bubble. 

Is Bitcoin a criminal tool? 
As a fast-growing asset, Bitcoin has both the characteristics of a commodity (similar to gold) and the hope of emerging blockchain technology (similar to stock market internet technology companies). Therefore, it is entirely possible for Bitcoin to be independent market independent of commodities and stocks. The essence of currency is trust. I believe that as Bitcoin becomes more and more mature, people will be able to enjoy the various convenience and benefits that Bitcoin brings. 

However, many criminal organisations, such as pyramid schemes, hackers, money laundering, drug trafficking etc are using Bitcoin's excellent features to help them commit criminal activities. 
In Bitcoin MLM activities, criminals just exploited people's ignorance of Bitcoin and the greed of dreams of getting rich overnight. 
In the hacking incident, criminals took advantage of the anonymity of Bitcoin in an attempt to escape legal sanctions. There is no essential difference between Bitcoin and cash, but it is more convenient and cheaper. 

Will Bitcoin become a new generation of capital? How long can it be "crazy", let us wait and see...The topic of Bitcoin will come to an end. If you want know more, we can discuss it together. 


References: 
Bary, A (2020) Why Bitcoin is the best investment opportunity post-pandemic
[Online]
Available at: https://www.barrons.com/articles/why-bitcoin-is-the-best-investment-opportunity-post-pandemic-heres-what-will-drive-the-price-higher-51607134443
(Accessed: 02/03/2021)

Kenton, W (2020) Bubbles
[Online]
Available at: https://www.investopedia.com/terms/b/bubble.asp
(Accessed: 02/03/2021) 





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