At the time of writing, Bitcoin was approaching a new high of USD 20,000 per bitcoin. What has changed since the last time you reached that top?
The Covid19 situation has changed the way people do many things. Technology has entered the forefront of everyday life. Things that used to be done physically are now being pushed into the virtual world: schooling, eating out, entertainment, work, and buying many goods and services. A natural fit for this type of agenda is the use of cryptocurrencies. Why? They are an extension of the technology driven world. They can also be used to compete with the existing financial system at a lower cost.
The last time Bitcoin hit its all-time high, many organizations were demonizing cryptocurrencies as a payment method used by criminals for terrorism, money laundering and illegal drug sales. Currently, Mastercard and Visa are linking cryptocurrencies to their credit cards, and Paypal is accepting Bitcoin for use on their platform. Many governments are talking about issuing cryptocurrency versions of their traditional currencies. There was also a push by Facebook partnering with big banks and other institutions to issue a cryptocurrency called Libra, it didn’t go very far but the intention is there. Cryptocurrencies are no longer for criminals, unless crimes are committed by said organizations.
The key to any technology is widespread or mass adoption. The more people use something, the greater the demand for its use and the more important it becomes. With widespread adoption, the systems that work alongside the product also begin to change. Look at the Apple iPod, Microsoft Windows, Internet providers and electric cars as examples. With the new demand new industries and products that were not very useful without taking the original product will come piggy back.
The weakness of traditional investments
Due to the Covid scenario and the developing depression, investments in stocks and bonds are becoming quite expensive and carry more risk as the underlying economy is disconnected from the performance of these markets. High levels of debt make real estate investment riskier than in the past, as does the volatility of rental income and people’s ability to pay their mortgages. Cash is a safe haven, but rising debt and inflation expectations mean cash is also at risk. The concept of diversification means that these investments should be maintained to some extent, but today there is a longing for an asset that complements these products. This new asset is cryptocurrencies. This product allows you to diversify away from over-indebtedness, undervalued currency and high inflation.