Dear Reader,
Bitcoin is often described as a future alternative to money.
In the last several years, Bitcoin, however, is developing as an investment vehicle.
The significant price rise of Bitcoin since 2013 makes the news regularly and attracts more and more new investors in cryptocurrencies. Lately, even institutions like hedge funds and asset management companies have invested in Bitcoin.
The main characteristic of Bitcoin as an investment vehicle is its volatility. Cryptocurrencies are quite volatile mainly because they do not participate in the capital structure of the company which issues them. Bitcoin and Ethereum are slightly different because they provide payments infrastructure.
Central banks continue to create money. Commercial banks' regular money creation by multiple deposits placements is enhanced by the money printing of central banks. All this new liquidity finds its way mainly in stocks and cryptocurrencies. When leading global central banks like the Federal Reserve, The European Central Bank, The Bank of Japan and The Bank of England stop printing money, Bitcoin's price could crash.
Actually, the more Bitcoin's price rises the less likely is that Bitcoin will become money. Of course, by change in the code Bitcoin's price could be split. The lower price could facilitate Bitcoin's functionality as a means of exchange, unit of account and store of value which are the main characteristics of money.
Actually, it is hard to put a ceiling on Bitcoin's price or value. Because, unlike common stocks of companies, there are no cash flows backing the value of Bitcoin. World's GDP hovers around 85 trillion USD. Bitcoin's market capitalization currently is around 1 trillion. I personally think Bitcoin's value could reach and even surpass multiple times in market capitalization the world's GDP of approximately 85 trillion USD. Simply because the velocity of money. As money is exchanged and turned over much more frequently than regular goods and services Bitcoin, which basically functions as payments infrastructure, could rise to multiples of the cumulative goods and services the world produces in a year.
If governments do not ban Bitcoin, Bitcoin could thrive as an investment vehicle and ultimately move closer to real money status.
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
1 comment:
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