Bitcoin, Not Banks, Will Save the Day
The global economy is in shock. Stocks, bonds, gold; they have all come under siege, with the S&P 500 predicted to plunge by at least 40 percent from the years high. Gloomy forecasts are becoming a regular component of every day, with the level of investor confidence, unemployment numbers, and coronavirus cases all tracking in the wrong direction.
In mid-March, the Dow dropped more than 1,300 points, sending crypto markets into panic mode. Bitcoin was oversold. In a single 24-hour period, $93 billion was wiped off crypto markets. Bitcoin prices followed suit by plunging 48 percent.
It is expected, however, that it will be Bitcoin that saves the day, not banks, not government intervention. In three weeks, a halving of the Bitcoin is scheduled to take place. Bitcoin bull, Tim Draper, thinks Bitcoin prices may reach an all-time high within two years.
Bitcoin Halving on the Horizon
Richard Ells, Electroneum CEO, believes the economy has not seen anything like what is happening now, since WW2. There has been a downturn in the crypto market as a whole. Mr. Ells goes on to say, “For the short term, expect severe volatility in the crypto market.” However, he goes on to say that he expects to see the market flourish again once the dust has settled. Since the third week of March, Bitcoin has rebounded from a low of $3,800 to $6, 200 plus. With Bitcoin halving in the next few weeks, the adoption of cryptocurrency has been rising around the world.
Dan Schatt, Cred CEO, thinks the current crisis has the potential to do permanent damage to some asset classes, but, in the short-term, Bitcoin, along with cryptocurrencies as a whole, will prevail.
Mr. Schatt notes the resilience of Bitcoin. Bitcoin value is up a full one-third from a year ago. Why is this? Bitcoin continues gaining favor as a store of value that will not be diluted. Due to inflation, the dollar today is worth 15 cents compared to 1970. Schatt suggests that the same rate of inflation will not be the case on Bitcoin over the next 50 years.
Bulls Buy up Bitcoin Lows
Although the price of Bitcoin fell from $7,700 to $3,800 in a single 24-hour period in Mid March, this price-point was short-lived. The price has risen 80 percent since then. Jeffrey Liu, CEO of XanPool, a crypto processing company, believes the future markets caused by the price plunge.
Even with the sell-offs, Mr. Liu remains bullish on the Bitcoin price. With the halving event coming up, there will be considerably fewer Bitcoin available on the open market. If the demand for Bitcoin stays somewhat the same, the outcome of halving will trigger an increase in Bitcoin price.
Closed Economies Could Bolster the Price of Bitcoin
With the world economy in turmoil, Bitcoin prices may be bolstered by closed economies such as China, Iran, and Venezuela. People in closed economies buy cryptocurrency to protect their wealth when there is reason to believe their local currency may lose value. In January 2020, there were rumblings of a potential war between the United States and Iran. This threat caused Bitcoin to increase in price from $7,000 to near $10,000. For reasons of this nature, Bitcoin is becoming an important component of diversified portfolios.