Bitcoin competes with fiat on price but lacks volume

Bitcoin is considered “sound money”, a common refusal among many proponents of popular cryptocurrency. With a network secured by a finite supply of 21 million and more than 120 exhales per second of computing power, consensus among industry commentators has often leaned toward becoming a global monetary superpower.

In barely a decade in its existence, the estimated value of bitcoin is already the 11th largest global monetary base. Earlier in November, bitcoin became larger than the Russian ruble for the first time in history.

Although bitcoin’s currencies have declined due to the economic crisis stemming from the coronovirus epidemic, bitcoin (BTC) has continued its peak trajectory until 2020. Even though the price fluctuations are more volatile, the BTC’s Black Thursday event, despite being around 120% year-over-year, declined significantly in mid-March.

With economic reform plans likely to include considerable stimulus packages, such cash injections are likely to lead to significant devaluations in fiat currency values. If bitcoin follows through the parabolic advance predicted by many market analysts, it is set to move the global monetary base log even higher.

The entire record of World Reserve currency history is consistent with the fact that the monetary base rises and falls. In the six monetary eras since 1450, no currency has maintained global dominance for more than 110 years. With the US dollar in the 95 years of being the world’s reserve currency, some are hoping that this is a sign that things may change soon.

Fiat currency weak

Despite being the most gold-backed fiat currency in the global market, the Russian ruble now has a lower monetary base than bitcoin. With rubles due to the ruble $ US, 000 and BTC jumping ahead of the $ 16,000 mark, 1 BTC is now equal to 1.2 million rubles. The next major currencies attack for bitcoin is the Canadian dollar. Based on its current circulating supply, moves above $ 18,000 for BTC will be seen overtaking CAD.

As stated earlier, bitcoin is already at a high level against seven national currencies, including Brazil, Argentina and Turkey. Increased inflation due to economic slowdown by COVID-19 has negatively affected many foreign currencies.

For now, bitcoin’s all-time high is $ 19,665 during the December 2017 bull run. However, in order for Bitcoin to begin to challenge major global currencies such as the US dollar, Chinese yuan and Japanese yen, it would need to reach a six-figure price, according to John Todaro, head of research at the institutional trading platform TradeBlock That Cointegraf. :

“We can see that bitcoin is outpacing other major fiat currencies, but it depends on how one measures the size of the FX market. The New Zealand Dollar (‘Kiwi’) is at the lower end of the group and is susceptible to passage by bitcoin, but currently exceeds $ 100 billion in daily trading volume, above that of bitcoin. Unlike other hard currency assets, bitcoin sees higher trading turnover, so even at a marginally higher market cap, bitcoin’s notary trading volume may be significantly higher than it is today. “

Bitcoin shines as global economy

The parabolic advances needed to move bitcoin to such heights would also put BTC in the same category as gold – a bonafide store of asset value. Many proponents of popular cryptocurrencies already recognize BTC as a suitable hedge against monetary debility and other forms of economic uncertainty.

Interest rate cuts in 2019, Ikigai Asset Management founder and chief investment officer Travis Kling warned that the prevailing debt situation at the time was a recipe for another global financial crisis. According to Kling, central banks were developing growth metrics to illustrate the impression of a healthy economy. When Kling made these remarks, the world was not untouched by the coronovirus epidemic.

Bitcoin often contained discussions about potential safe-haven assets that could be used as a hedge against another global recession. Amidst the panic over the sale of COVID-19 assets, BTC did not survive the mass liquidation on Thursday, proving that it has not yet achieved that coveted status. The largest crypto by market capitalization crashed by about 50%, to about $ 3,800. However, in the exact eight months since then, the price of BTC is over 300%.

Commenting on the possibility of bitcoin reaching a new all-time high in the short term, Todaro commented that it would be difficult to establish a sustained push toward the record before the end of 2020, adding: “This bull cycle is good for us The way it should bring before ATH on a long-term basis and with government spending increasing and leaving May behind, we are set for one of the most lucrative boom periods in the history of bitcoin. “

Joe Disaquale, CEO of crypto hedge fund BitBull Capital, also sees Bitcoin setting a new all-time high during this current bull run, which Contelegraph says: “It’s very likely [that Bitcoin reaches a new all-time high] Since bitcoin has now crossed $ 16,000, which was a major resistance level. $ 20,000 is not far from this point unless a major negative event affects the market in the short term. “

COVID-19 and infinite quantitative easing

While inflation remains a real concern for many countries, 2020 has been an important year for bitcoin in terms of supply dynamics. The May halt incident saw new bitcoin supply cut by half.

Meanwhile, many governments adopted proactive monetary policies, including incentive cash injection, in response to economic stress induced by COVID-19. According to World Bank estimates, global GDP is expected to decline by 5.2% in 2020 – the largest contraction in decades. Back in June, the World Bank outlined a roadmap for countries to navigate economic problems:

“Policies to reinvigorate both the short- and long-term have been aimed at strengthening health services and implementing targeted incentive measures to support growth, including support for the private sector and direct funding to people. During the mitigation period, countries should focus on maintaining economic activity with the support of households, firms, and essential services. “

Recognizing the declining value of cash holdings, some companies are already pivoting a bitcoin as a treasury reserve asset. Nasdaq-listed MicroStratey made headlines in August, when it announced its acquisition of 21,454 BTC – valued at $ 250 million at the time. Large traditional institutions demanded more interest in Bitcoin as a means of reserve soon to buy.

related: The Next Big Treasury: Corporations Buy Bitcoin as Treasury Reserve

The business intelligence firm doubled down on its bitcoin adoption policy with the purchase of an additional 16,796-BTC ($ 175 million) in September. In less than two months, the company has seen more than $ 160 million increase in the value of its BTC holdings. The same thing can be said about other non-crypto-native companies that bought BTC as a reserve.

While bitcoin retains some of the characteristics related to currencies, the lack of supply shortage for FIT makes any attempt to solve the comparative problem between the two. If so, perhaps market capitalization builds on the size of other key asset bases to improve the growth of bitcoin, as DiPasquale stated:

“Crossing bitcoin fiat currencies is not a metric that we should focus on because there is no circulation limit for fiat currencies. Instead, the market cap is a better metric, and bitcoin is now one of the top-20 assets (stock, ETF and cryptocurrency rankings). “

It is difficult to reverse due to the economic downturn

In a speech delivered on 6 November, US Federal Reserve President Jerome Powell rejected the expectation of a rapid recovery from the current economic contraction: “The current economic downturn is the most severe in our lifetime. It will take some time to get back to the level of economic activity and employment early this year. “

Pavel’s remarks resonate with similar warnings from the World Bank and other financial establishments. In fact, the consensus is that the confluence of global, regional and national economic barriers developed by COVID-19 will be difficult to reverse in the short term.

Pharmaceutical giant Pfizer recently announced that its COVID-19 vaccine was more than 90% effective in preventing the virus. While growth is part of the good news in the fight against the epidemic, market analysts say the economy is destined for a bottom-up path regardless of a vaccine.

Todaro believes that “equity markets are pricing the COVID-19 vaccine as a protector of industrialists and individual-person retail companies.” However, he said the good news alone would not promote economic recovery as the dynamics of supply and demand would have to be reestablished. Furthermore, according to Todaro, various established companies are in dire financial straits, and without additional relief by governments, they are likely to go bankrupt: “This uncertainty is now starting to return to something, seeing a pullback in equity markets. “

With more pain ahead, bitcoin has been primed to receive even more institutional attention as big-money players seek alternative investment vehicles. Indeed, the flow of smart money into bitcoin already has some stakeholders predicting that BTC will challenge gold as a real asset of choice for institutional investors.