The Bullish and Bearish case for Bitcoin (BTC). – Golden Dragon
First of all the Bitcoin halving reward could have a way lower real impact in creating deflation in the market, since eve if miners would have fewer coins to dump into the market with this supply shock (12,5 ₿ to 6.25₿ after the halving), of course, that historically we can see below that the price has positively responded to the previous Bitcoin (BTC)s halvings. However, wich the market didn’t have before was a solid future contract structure, which is a standard procedure nowadays that miners hedge their selling process with future contracts, which could be the normalizing factor this time. Using lending and leverage mechanisms, miners could stand to maintain the same level of selling pressure, even receiving fewer Bitcoin (BTC)s per block. Yes, it sounds like the only speculation. Still, Bitcoin mining has become a business that cant gives the luxury of see its profits shrink, even with some of them pleading to start an Initial Public Offering (IPO), a downsizing would look very bad and ineffective response to the halvings. Sure, if the prices skyrocket they could compensate for the reduction in the reward, but this is an unsure thing and doesn’t sell a business plan, in the bearish last year of Bitcoin we could see the price going below on some believed to be the floor since below specific price the mining wouldn’t be profitable enough to keep machines going. Even so, we saw markets plunging and mining operations expanding, a dichotomy that can be attributed to these derivatives of Bitcoin that we early mentioned. Exposed that we can link that the lastest Bull run of the Crypto market applies for a psychological effect that due to the past events correlated to the price uprising led investors to run into the asset expecting to profit over the Bitcoin Halving event fulfilling its own promise, but if the event didn’t sustain this effect we might see a sell-off, as the market faces a reality check.
Those who believed that Cryptocurrencies could actually work as a haven asset to an eventual destabilization of the financial markets could be forgetting two-pillar aspects of why this wouldn’t work as it is right now.
The High Volatility: Due to its limited liquidity, Bitcoin and other cryptocurrencies cant let investors assured that their funds will worthy something in the future since there isn’t yet a common knowledge of its intrinsic value. Probably if I go to new york and offer to someone to take my Bitcoin in exchange for a product that costs way less of the number of Bitcoin (BTC)s that I’m offering in exchange I might get some excited volunteers, however, if I’m in less urbanized area of some country probably I’m going to leave with empty hands, which certainly would work for example in both areas is a bar of gold, and even if we see this an antique thing and try to correlate with the equivalent progress of technology, were dozens that before didn’t had a cellphone and today are using an iPhone to prove an counter-argument, we must remember that Economy and the way that we use cash must be democratized, even with thousands of unbanked individuals, the knowledge over the value of a Dollar Bill is democratized and allow those people to live in our society. A solution for that might be the governmental initiatives to provide a digital currency backed by the state, that through Blockchain could be more transparent and aware of the cash flow, which might regain public trust over the government power over money, beyond that the mass adoption of Cryptocurrencies remains unrealistic.
Conflict with the Justice System: Every day Courts across the globe are settling the conflicts that permeate our society, and most of them are related somehow to a financial disagreement, which means that if the state doesn’t have the capability to intervene in this matter, by freezing, confiscating or relocating assets, because they are running in some decentralized blockchain, we might start to see a crack in our society if cryptocurrencies as they are, become the standard. A crack caused by the consecutive inability of the law to effectively recover or avoid misusing of the asset in a trial, yes we could argue that this is already possible right now, but as the majority of the society still have the majority of its proprieties collateralized by a Fiat currency, so it’s easier to apply a penalty.
We can conclude that cryptocurrencies are a solution that is seeking for a problem to solve, could be the lack of trust over government entities, the scarcity of access to the financial system by part of the population; the higher expenses to move money across the globe and etc. What we must keep in mind is that the majority of the market that is engaged with cryptocurrencies nowadays isn’t the ones that are even looking to the development of this technology and help to really solve the problems early mentioned, they are under the shadow of those who made quick fortune over the surging of the market, and hope to do the same in the future. All the bubbles follow the same pattern, if there’s wasn’t any final purpose for that interest over a specific asset, like during the Tulip Mania people eventually will get over and throw that optimism into oblivion.
However, if the technology that started the market is good enough, prices will be brutalized by the market until the population starts to look first over the products and not the asset tied to the technology, like what happened on the dot-com bubble, that after its crash caused for several multi-million dollar companies that didn’t had do it nothing special than operate in the sector, managed in the future to create the most powerful companies that exists.
In short, Cryptocurrencies, as are right now, are a Noah’s Ark in the middle of a desert under a blue sky, with no forecast to rain, an apocalypse omen that may never be fulfilled and indeed aren’t the most practical answers for one even if eventually it comes now.
Thank you for reading and leave your comments and opinions below.
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Disclaimer: All content of Golden Dragon has only educational and informational purposes, and never should use it as financial advice
Published at Fri, 14 Feb 2020 21:09:40 +0000
