Will Bitcoin Become Money?

Dear Reader,

Bitcoin, the most popular and most liquid cryptocurrency is expected by many investment analysts to become real money.

But what is money, actually. The definition of money is threefold:  1) Store of value, 2) Means of exchange and 3) Unit of account.

Bitcoin more or less fulfills, at least partially, these criteria. The real problem with Bitcoin becoming fully fledged money in the long-term is two fold: 1) Bitcoin's price is still too volatile and 2) There is still a real danger that after a concerted global effort, the largest and most powerful countries like USA, China, India, Russia, Germany, UK, France etc. could decide to outlaw Bitcoin and other cryptocurrencies and order their central banks to ban Bitcoin trades clearing.

However, Bitcoin's benefits are just too large for even the largest countries to ignore. What do actually governments want? Governments want to fulfill the promises they gave to the people. Which is done mainly by spending money, and lots of it. Bitcoin's popularity has driven many newbie investors like people from information technology, healthcare, energy industries to invest first in Bitcoin, then later in stocks for example. Which increases the trading fees that flow to banks, which in turn increases banks' profits and they transfer more money to governments in the form of taxes on profit. In the same way, Bitcoin, by facilitating money transfers, brings more revenue to governments. In addition the blockchain  technology, underlying Bitcoin could provide many efficiencies which will make many industries more profitable. All these developments lessen the risk of global governments banning cryptocurrencies.

As regards to liquidity, Bitcoin's growing popularity should solve that problem too. Stock market liquidity, for example, rests on two pillars: institutional investors, like pension funds, brokerages, investment banks, asset managers, hedge funds and retail investors. Both institutions and retail investors contribute to stock market liquidity which is quite large especially on the USA and other large developed markets' bourses. With Bitcoin retail investors, like mainly information technologists first, then financial markets and banking professionals were the pioneers to trade Bitcoin and other cryptocurrencies actively. Slowly, however, from six months ago news are flowing that more and more institutional investors like hedge funds, asset managers are buying into Bitcoin. What is more, the two largest investment banks by revenue JPMorgan Chase and Goldman Sachs are taking up more and more actions to facilitate clearing of trading with Bitcoin.

I forecast that slowly, in the space of 5-7 years, Bitcoin will be able to take up 2-3% of the global transaction volume of the major currencies. As with other new financial assets' adoption a lot depends on people's psychology. But things are now definitely in motion, momentum is building ad success begets success.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich