Cryptocurrency: Are We Living a New Era of Currency & Prosperity?
In recent years, cryptocurrencies have become the great disruptor of the world economy. In the financial community, there is less and less doubt about the promising future of cryptocurrencies and how they will transform the global economy.
In the US, as Forbes recently reported, 15% of adult citizens already own cryptocurrencies and, at this rate, “the daily trading volume of cryptocurrencies will exceed in less than 4 years the total daily trading volume of equities, and in less than 5 years it will exceed the total daily trading volume of all corporate and government bonds”.
Even with this data, many readers will have reasonable doubts about investing in cryptocurrencies at this point in history.
There is no doubt that investing in cryptocurrencies has created a myriad of millionaires, but it is also clear that there has been an economic bubble in the world of cryptocurrencies, fueled by unrestrained speculation.
However, there was also a bubble in the dotcom sector, and that did not mean that investing in online companies was no longer profitable.
In the graph we can observe the evolution of the price of Bitcoin from 2018 to the present (21 March 2022). As can be perceived, both the Bitcoin and the cryptocurrency market have a cyclical behavior – which is precisely what a crypto trading bot uses to operate in the exchange market.
Although the price peaked last year, the growth and current rate of Bitcoin is still unbelievable: 3,676.74%.
The previous historical maximum, located approximately at $20,000, was reached at the end of 2017; while we are currently fully in the next bullish cycle, whose maximum has been, for now in 2022, at around $41,000.
Within the cryptocurrency market there is an unquestionable king: Bitcoin.
It does not have the fastest transfer rate, the lowest transaction costs or the best security protocols. And yet no one dares to question its dominance.
At the time of writing, Bitcoin has still a dominance of close to 50%, which means that almost 70% of all transactions in cryptocurrencies are in Bitcoin – even though this percentage is slowly dropping, due to the strong competition.
Investing in Bitcoin is synonymous with investing in the dominant cryptocurrency par excellence, digital gold, the refuge from the world’s political and economic storms. The great disruptor of the economic order.
Recently in the financial community there has been a lot of talk about the imminent possibility of a new rally in the price of Bitcoin, a new bull run that could be the necessary trigger for the bitcoin price to reach $100,000, according to some mathematical models.
The trigger that could trigger the price of bitcoin: unlimited money printing.
Since the recent crisis caused by the global coronavirus pandemic most major central banks have opted to print large amounts of money to inject into the economy to prevent it from collapsing.
In the US, the Federal Reserve is currently printing money at a pace never seen before. By the end of the year it is estimated that the Fed will have injected $3.5 trillion into the US economy.
When a central bank decides to print money continuously and unlimitedly, as is happening right now in the US and Europe, the price of the currency is devalued and inflation is fueled. This can lead to periods of hyperinflation (as has happened in Zimbabwe and Venezuela).
Wealth cannot be created out of nothing. When money is printed without wealth to back its value, all that is achieved is to dilute the value of existing money. Due to the unlimited printing of money, the loaf of bread that today costs $1 will be worth $2 tomorrow.
The $100,000 that a citizen has saved in the bank in a few years could have a drastically lower purchasing power than it has today.
Printing money in an unlimited way is a way of stealing purchasing power from those who have accumulated money, diluting its value without the saver perceiving that his wealth is being stolen.
To avoid such covert subtraction of purchasing power by governments, savers and holders of large fortunes are opting to move their capital into safe-haven assets: those over which governments have no power, and cannot devalue or manipulate.
The main safe-haven assets we find today are two: Gold and Bitcoin. Historically, gold has always played the role of safe haven asset. However, in recent years we are seeing how Bitcoin is taking center stage and more and more institutions, large and small investors are choosing to invest in Bitcoin to safeguard the purchasing power of their wealth.
This new virtue of Bitcoin – its role as a safe haven asset – could very likely be the trigger required for bitcoin to start its new bull run that will place its price above $100,000.
In other words: investing in Bitcoin now could be the last chance we have in our lifetime to buy Bitcoin below $100,000.
So, how far are we really from reaching the absolute era of virtual currencies? Will fiat currencies ever disappear or is it just an era of change that will not change anything significantly?
At the moment, the signs are that we are about to enter a new era of payment. This may be the end or at least an era in which the current currency is forced to share its glory with the new member: Bitcoin.
What is clear is that it is now or never to make the most of the future. That is why the crypto trading market is so strong. Plus, with the right software – the sky can be the limit.