The rise of Bitcoin against the background of economic problems points to new roles of blockchain-currencies
The return of the value of Bitcoin for the first time in the last three years, and even in the situation of global economic uncertainty up to $ 1000 and higher, indicates that it is gradually occupying a niche means of long-term savings. At the same time, other blockchain platforms create the necessary conditions for the existence of transactional currencies.
Markets develop cyclically. Not surprisingly, three years after the emergence of the speculative bubble of the end of 2013, Bitcoin again attracts attention. Experts and mainstream media buried virtual currency countless times, but, apparently, Bitcoin stubbornly refuses to die.
')
At this time, the rise of Bitcoin to $ 1000 occurs under completely different circumstances. Bitcoin and blockchain ecosystem has matured significantly. There were many large trading markets instead of one huge, poorly organized and insecure. Yes, it's about the ill-fated MtGox, which served as a single hub for trading and became a single point of catastrophic failure. Awareness is now much better, liquidity is much higher. The rise in Bitcoin value was rapid (and, to put it mildly, volatile). But at the time of publication does not show signs of a bubble - an irrationally rapid growth, with periods of double-digit daily jumps, which ends with a steep rise and inevitable ruthless fall.
There are reasons for the growth of Bitcoin and in addition to purely speculative interest. As well as the bitcoin ecosystem, the global economic crisis has also “grown” over the past three years. Now we understand better what problems we are dealing with and how Bitcoin fits into the big picture.
China has always been a major player in the Bitcoin ecosystem, providing approximately 70% of all bitcoin mining (the process during which bitcoins are created and transactions in a distributed network are confirmed) and up to 90% of all trades. The Chinese government devalued the yuan as a measure to increase the competitiveness of the national economy with a high state stake. And, amid the gain of the US dollar, this shifted the focus of interest of Chinese speculators toward Bitcoin. Moreover, Bitcoin has become a popular and reliable means of avoiding currency controls introduced by government agencies. If you need to withdraw money from China, you have several options, and one of them is Bitcoin. So the surge in demand is not at all surprising: well-to-do Chinese are looking for ways to save savings, other than investing in the yuan.
China has a significant impact on the global economy. What happens here next year will affect the whole world. How slow is China's economy? How will the problems of the vast and opaque shadow banking sector be addressed? How will relations with the United States and President Trump, who is much more hostile to Chinese imports and labor, than the previous administration? What will China do with its significant dollar reserve? All these questions will have to find answers. This year the 19th All-Chinese Congress of the Chinese Communist Party will be held, where a new government will be formed and five of the seven members of the Standing Committee of the Politburo, the country's highest governing body, will be re-elected. All this creates considerable uncertainty, and the struggle of potential candidates for power will have serious economic consequences for the whole world.
Bitcoin offers hope to a frightened Chinese middle class. By and large, any form of uncertainty plays into the hands of Bitcoin as a “safe investment”, whether it be the need to move funds abroad or protection against the forced conversion of currencies and inflation. Bitcoin was not a good store of value, but as market capitalization and awareness increased, volatility decreased significantly. And over a large time period, he showed good growth, while the yuan was only rolling on a sloping one.
The level of uncertainty in the Chinese economy is high, but in other countries it is still more interesting. The eurozone is in a situation that is increasingly becoming like a long stagnation. Only successful measures of quantitative easing prevented full-fledged deflation and depression. There are no changes foreseen in the currency block. The growing popularity of right-wing and populist parties across Europe shows that dissatisfaction with the political and economic status quo has reached a critical point. Antinomenclature candidates achieve results that previously seemed unthinkable. The presidential elections in France, which will be held in May, will demonstrate the real situation in terms of public sentiment. In Italy, which survived the recent resignation of Prime Minister Renzi after a referendum on constitutional reform, which was not supported, the situation with Monte Dei Paschi, the oldest and most inoperable bank, was not resolved. The state hastily concocted a rescue plan and was able to protect retail investors (who, according to European laws, were to receive only a fraction of their savings). However, it is not clear if these measures are enough, and besides there are enough banks in the country with similar problems. Even Germany, the eternal bastion of financial stability, has problems with Deutsche Bank. The problems with the American regulators seem to have been resolved, but behind this whole story there’s not the most pleasant picture of over-exploitation of bank assets. Add an unpleasant situation with Brexit here ... And you will understand that nothing is clear.
Let's look at Bitcoin from the point of view of a wider economic context. Like gold, it has a limited offer that cannot be interfered with. Unlike gold, it can be easily purchased in any quantity and transported across borders almost freely. He received, strictly speaking, not quite deservedly, the reputation of "safe asset". Of course, the price of Bitcoin tends to inversely correlate with the price of traditional investment options, and economic turmoil of a serious scale, as a rule, gives it an impetus to growth. However, in the past, it did not show itself as a reliable store of value due to high volatility. Of course, a certain volatility is observed so far. Nevertheless, it has greatly weakened over the past three years due to the increasing popularity of Bitcoin and the blockchain and the emergence of new exchanges. Bitcoin is no longer bargaining anymore. There were rules, an institutional interest, an exchange investment fund is being formed. That is why some mainstream investors have shown interest in using Bitcoin as an alternative to traditional savings instruments, such as gold. First of all, this applies to investors who plan to invest for many years and experience daily changes in value without any problems.
There is one more thing that makes Bitcoin an excellent store of value. Bitcoin is impossible to withdraw from you. If you use it correctly, Bitcoin really belongs to you to the extent that the currency stored in banks cannot belong to you in principle. The money in the bank can be withdrawn from you unilaterally: the actions of the bank or at the request of the government are features of some forms of forced conversion or “haircut”. But if you keep Bitcoins on an address, the private key to which you only have (and this address is not on the stock exchange), then they are protected by the laws of mathematics and physics underlying the universe. Therefore, despite the changes in the Bitcoin rate against the dollar, it has quite tangible advantages: it cannot be assigned by the state or by third parties. This advantage is becoming more and more attractive in the era of forced currency conversions and measures to save the economy.
The overall picture is enhanced by internal problems of Bitcoin. Today it is not suitable for use as a transactional currency. The Bitcoin protocol simply cannot provide the necessary bandwidth. Scaling up is underway, including promising Segregated Withess or SegWit technology. SegWit will allow you to compress a large number of transactions in one package or “block”, thereby increasing performance without any changes in the root software. Development and implementation are slow, and the decentralized nature of Bitcoin means that it will not be easy to reach a consensus between stakeholders. And while these tasks are being solved, Bitcoin’s transactional performance remains insufficient for its active use in the field of money transfer or e-commerce. The blocks are usually full, so you have to pay high commissions to guarantee the acceptance of the transaction. This, of course, increases the attractiveness of Bitcoin for miners and contributes to the growth of its value.
In a sense, it doesn’t matter whether Bitcoin’s performance rises by two, ten, or even a hundred times. It is still not enough to maintain the role of a popular transaction currency - the amount of money circulating around the world is simply too large. One way or another, the current role of Bitcoin is to perform the function of an effective savings tool.
The situation with Bitcoin gives hope for the development of other blockchain-currencies. The last three years have been a period of rapid development in the field of cryptocurrency. To date, numerous usage scenarios are being formed. Bitcoin becomes a means of accumulation and a calculated currency, since the remaining cryptocurrencies (and other currencies) are exchanged for it. But the work on establishing interaction with other markets, apparently, is moving in the direction of not one, but several different blockchain-tokens.
However, no protocol could withstand the load of so many transactions, so it makes sense to introduce a specialization. Austrian economist Friedrich Hayek predicted something similar, rather similar to the market of competing currencies, than to the system of money provided by the states. The best currencies — those that best serve business and consumers — will naturally make their way up. In the end, there will be only a handful of winners.
We are at an early stage in the blockchain history to figure out who will be among the winners. At the same time, we are just at the initial stage of the formation of the “primary broth” currency competition. Businesses launch and promote new cryptocurrencies that are becoming popular in their niches. Gamecredit is positioning itself as the main payment method in the gaming industry, which has already grown to $ 100 billion. Gamecredit allows you to avoid significant costs and problems with the infusion and movement of money between game economies. Incent runs as a promotional currency. There are currencies to preserve anonymity, which are more or less used on the drug market in Darkweb (a free market that does not recognize legal restrictions). Currencies like Dogecoin, which are fun-oriented, are great for users of social networks. Cryptocoins are created to be used as local currencies in specific geographic areas, such as the Bristol pound or the Berkshera. There are currencies aimed at the recruiting sector , or acting on the principles of time banking.
The desire to bring such applications to the market resemble the Gold Rush times. Blockchain is still at an early stage of development and there are a lot of opportunities. But it is worth remembering that for every Gold Rush, there are their own sellers of spades - people who think in a businesslike manner, regardless of the success or failure of any particular initiative. It is logical to assume that software platforms that allow users to create and run their own unique digital tokens with a minimum of effort and without the need to go into technical details will remain a big win.
The world is changing very quickly, and, without doubt, the global picture will also change. Individual currencies will appear and disappear until several favorites rise from the bottom. But Bitcoin seems to have firmly established itself in a special niche: rather, not as a means of exchange, but as a reliable digital repository of finance, far from the threat of devaluation, inflation, forced conversion of currencies and other dangers of today's unhealthy global economy.
Markets develop cyclically. Not surprisingly, three years after the emergence of the speculative bubble of the end of 2013, Bitcoin again attracts attention. Experts and mainstream media buried virtual currency countless times, but, apparently, Bitcoin stubbornly refuses to die.
')
At this time, the rise of Bitcoin to $ 1000 occurs under completely different circumstances. Bitcoin and blockchain ecosystem has matured significantly. There were many large trading markets instead of one huge, poorly organized and insecure. Yes, it's about the ill-fated MtGox, which served as a single hub for trading and became a single point of catastrophic failure. Awareness is now much better, liquidity is much higher. The rise in Bitcoin value was rapid (and, to put it mildly, volatile). But at the time of publication does not show signs of a bubble - an irrationally rapid growth, with periods of double-digit daily jumps, which ends with a steep rise and inevitable ruthless fall.
The state of the global economy
There are reasons for the growth of Bitcoin and in addition to purely speculative interest. As well as the bitcoin ecosystem, the global economic crisis has also “grown” over the past three years. Now we understand better what problems we are dealing with and how Bitcoin fits into the big picture.
China has always been a major player in the Bitcoin ecosystem, providing approximately 70% of all bitcoin mining (the process during which bitcoins are created and transactions in a distributed network are confirmed) and up to 90% of all trades. The Chinese government devalued the yuan as a measure to increase the competitiveness of the national economy with a high state stake. And, amid the gain of the US dollar, this shifted the focus of interest of Chinese speculators toward Bitcoin. Moreover, Bitcoin has become a popular and reliable means of avoiding currency controls introduced by government agencies. If you need to withdraw money from China, you have several options, and one of them is Bitcoin. So the surge in demand is not at all surprising: well-to-do Chinese are looking for ways to save savings, other than investing in the yuan.
China has a significant impact on the global economy. What happens here next year will affect the whole world. How slow is China's economy? How will the problems of the vast and opaque shadow banking sector be addressed? How will relations with the United States and President Trump, who is much more hostile to Chinese imports and labor, than the previous administration? What will China do with its significant dollar reserve? All these questions will have to find answers. This year the 19th All-Chinese Congress of the Chinese Communist Party will be held, where a new government will be formed and five of the seven members of the Standing Committee of the Politburo, the country's highest governing body, will be re-elected. All this creates considerable uncertainty, and the struggle of potential candidates for power will have serious economic consequences for the whole world.
Bitcoin offers hope to a frightened Chinese middle class. By and large, any form of uncertainty plays into the hands of Bitcoin as a “safe investment”, whether it be the need to move funds abroad or protection against the forced conversion of currencies and inflation. Bitcoin was not a good store of value, but as market capitalization and awareness increased, volatility decreased significantly. And over a large time period, he showed good growth, while the yuan was only rolling on a sloping one.
The level of uncertainty in the Chinese economy is high, but in other countries it is still more interesting. The eurozone is in a situation that is increasingly becoming like a long stagnation. Only successful measures of quantitative easing prevented full-fledged deflation and depression. There are no changes foreseen in the currency block. The growing popularity of right-wing and populist parties across Europe shows that dissatisfaction with the political and economic status quo has reached a critical point. Antinomenclature candidates achieve results that previously seemed unthinkable. The presidential elections in France, which will be held in May, will demonstrate the real situation in terms of public sentiment. In Italy, which survived the recent resignation of Prime Minister Renzi after a referendum on constitutional reform, which was not supported, the situation with Monte Dei Paschi, the oldest and most inoperable bank, was not resolved. The state hastily concocted a rescue plan and was able to protect retail investors (who, according to European laws, were to receive only a fraction of their savings). However, it is not clear if these measures are enough, and besides there are enough banks in the country with similar problems. Even Germany, the eternal bastion of financial stability, has problems with Deutsche Bank. The problems with the American regulators seem to have been resolved, but behind this whole story there’s not the most pleasant picture of over-exploitation of bank assets. Add an unpleasant situation with Brexit here ... And you will understand that nothing is clear.
The role and limitations of Bitcoin
Let's look at Bitcoin from the point of view of a wider economic context. Like gold, it has a limited offer that cannot be interfered with. Unlike gold, it can be easily purchased in any quantity and transported across borders almost freely. He received, strictly speaking, not quite deservedly, the reputation of "safe asset". Of course, the price of Bitcoin tends to inversely correlate with the price of traditional investment options, and economic turmoil of a serious scale, as a rule, gives it an impetus to growth. However, in the past, it did not show itself as a reliable store of value due to high volatility. Of course, a certain volatility is observed so far. Nevertheless, it has greatly weakened over the past three years due to the increasing popularity of Bitcoin and the blockchain and the emergence of new exchanges. Bitcoin is no longer bargaining anymore. There were rules, an institutional interest, an exchange investment fund is being formed. That is why some mainstream investors have shown interest in using Bitcoin as an alternative to traditional savings instruments, such as gold. First of all, this applies to investors who plan to invest for many years and experience daily changes in value without any problems.
There is one more thing that makes Bitcoin an excellent store of value. Bitcoin is impossible to withdraw from you. If you use it correctly, Bitcoin really belongs to you to the extent that the currency stored in banks cannot belong to you in principle. The money in the bank can be withdrawn from you unilaterally: the actions of the bank or at the request of the government are features of some forms of forced conversion or “haircut”. But if you keep Bitcoins on an address, the private key to which you only have (and this address is not on the stock exchange), then they are protected by the laws of mathematics and physics underlying the universe. Therefore, despite the changes in the Bitcoin rate against the dollar, it has quite tangible advantages: it cannot be assigned by the state or by third parties. This advantage is becoming more and more attractive in the era of forced currency conversions and measures to save the economy.
The overall picture is enhanced by internal problems of Bitcoin. Today it is not suitable for use as a transactional currency. The Bitcoin protocol simply cannot provide the necessary bandwidth. Scaling up is underway, including promising Segregated Withess or SegWit technology. SegWit will allow you to compress a large number of transactions in one package or “block”, thereby increasing performance without any changes in the root software. Development and implementation are slow, and the decentralized nature of Bitcoin means that it will not be easy to reach a consensus between stakeholders. And while these tasks are being solved, Bitcoin’s transactional performance remains insufficient for its active use in the field of money transfer or e-commerce. The blocks are usually full, so you have to pay high commissions to guarantee the acceptance of the transaction. This, of course, increases the attractiveness of Bitcoin for miners and contributes to the growth of its value.
In a sense, it doesn’t matter whether Bitcoin’s performance rises by two, ten, or even a hundred times. It is still not enough to maintain the role of a popular transaction currency - the amount of money circulating around the world is simply too large. One way or another, the current role of Bitcoin is to perform the function of an effective savings tool.
Blockchain and transactional currencies
The situation with Bitcoin gives hope for the development of other blockchain-currencies. The last three years have been a period of rapid development in the field of cryptocurrency. To date, numerous usage scenarios are being formed. Bitcoin becomes a means of accumulation and a calculated currency, since the remaining cryptocurrencies (and other currencies) are exchanged for it. But the work on establishing interaction with other markets, apparently, is moving in the direction of not one, but several different blockchain-tokens.
However, no protocol could withstand the load of so many transactions, so it makes sense to introduce a specialization. Austrian economist Friedrich Hayek predicted something similar, rather similar to the market of competing currencies, than to the system of money provided by the states. The best currencies — those that best serve business and consumers — will naturally make their way up. In the end, there will be only a handful of winners.
We are at an early stage in the blockchain history to figure out who will be among the winners. At the same time, we are just at the initial stage of the formation of the “primary broth” currency competition. Businesses launch and promote new cryptocurrencies that are becoming popular in their niches. Gamecredit is positioning itself as the main payment method in the gaming industry, which has already grown to $ 100 billion. Gamecredit allows you to avoid significant costs and problems with the infusion and movement of money between game economies. Incent runs as a promotional currency. There are currencies to preserve anonymity, which are more or less used on the drug market in Darkweb (a free market that does not recognize legal restrictions). Currencies like Dogecoin, which are fun-oriented, are great for users of social networks. Cryptocoins are created to be used as local currencies in specific geographic areas, such as the Bristol pound or the Berkshera. There are currencies aimed at the recruiting sector , or acting on the principles of time banking.
The desire to bring such applications to the market resemble the Gold Rush times. Blockchain is still at an early stage of development and there are a lot of opportunities. But it is worth remembering that for every Gold Rush, there are their own sellers of spades - people who think in a businesslike manner, regardless of the success or failure of any particular initiative. It is logical to assume that software platforms that allow users to create and run their own unique digital tokens with a minimum of effort and without the need to go into technical details will remain a big win.
The world is changing very quickly, and, without doubt, the global picture will also change. Individual currencies will appear and disappear until several favorites rise from the bottom. But Bitcoin seems to have firmly established itself in a special niche: rather, not as a means of exchange, but as a reliable digital repository of finance, far from the threat of devaluation, inflation, forced conversion of currencies and other dangers of today's unhealthy global economy.
Source: https://habr.com/ru/post/398931/
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