Bitcoin: zero without a wand, or the newfound holy grail
Is Bitcoin destined to become the savior of the world, or will it burst like a soap bubble? There is no definite answer to this question. But you can speculate on this topic. Bitcoin's discounted value is influenced either by the likelihood that it will play the role of virtual gold, or by the favor of the bigwigs from the world of crime. If there is a bubble, then we need to look for an idea that managed to inflate it. Offhand Bitcoin is a good idea. There are no borders for this virtual currency, it is not controlled by states and provides an opportunity for any user to conduct anonymous transactions in the presence of the Internet. It looks very tempting. The same cannot be said about Bitcoin itself. How much is this cryptocurrency really worth? $ 100000, $ 1000, $ 100 or $ 0? The latter seems to be the most likely option. This becomes especially clear when you look at how it is perceived when it is suggested that this global virtual currency will become a replacement for the dollar. How big are the chances of Bitcoin crowding out the dollar? They are rather illusive, because the thoughtfulness of this virtual one is far from perfect. With its help, you can make a ridiculously small number of transactions, spending a lot of electricity on it. This makes cryptocurrency unusable as a substitute for fiduciary money. Even if Bitcoin manages to act more efficiently, we must not forget about Gresham's Law, according to which the best money is forced out of circulation by the worst. What happens when consumers are given the choice of which currencies they prefer for their day to day expenses? They will no doubt spend less expensive paper bills and save Bitcoins for a rainy day. And there is an explanation for this. After all, there are few normal people who want to act as a person who paid ten thousand Bitcoins in 2010, sad for him, for 2 pizzas. And today they cost about forty million dollars. But if you do not spend virtual currency, then it will never be able to gain the status of a common currency. We can talk about two not so ambitious ideas, thanks to which Bitcoin would acquire a real discounted value. First, , he could become a representative of the form of funds with a limited scope of consumption. So, it is literally irreplaceable for those who need to illegally buy substances prohibited for free sale. It is also enjoyed by those who are unwilling to comply with capital controls. Second , Bitcoin can become an analogue of virtual precious metals, which are insurance that always retains value. Even in cases where purchasing power falls. Using Bitcoins to Conduct Illegal Transactions Analyst Dan Davis from Frontline Analysts Bank made an attempt to calculate this cryptocurrency, taking into account the existence of restrictions on the release of Bitcoin simultaneously in circulation. More than 21 million of them cannot be produced. Everyone knows that the amount of money supply of a currency multiplied by the speed with which it circulates should be equal to the product of the price and the number of transactions. According to Mr. Davis, in the case of Bitcoin, only three of the above components can be considered. He emphasizes that even criminals often quote prices in dollars, not cryptocurrencies. And the latter is immediately converted upon receipt. If we assume that the Internet is used by representatives of the drug business to conduct all transactions, then we can say that virtual currencies circulate at the same speed as fiat money. And if we take into account that about one hundred and twenty billion dollars turnover annually in the drug business, then, substituting all the values into the formula, we get $ 571, which is the value of Bitcoin. Accordingly, with the growth of drug trafficking and the number of accumulated crypto-coins, this indicator increases. It seems that drug dealers are quite happy with the restrictions that exist in the Bitcoin system. We are talking about the unpredictability of the time period that may be required for the transaction to complete, and the amount of costs for the transaction. It should be remembered, however, that money laundering requires even greater costs. It must be said here that the UN carried out research in which the relationship of cryptocurrency with drug crime, the online segment of the drug business, was studied. And the results suggest that this figure is not as great as Mr. Davis says. The cryptocurrency is mainly traded in retail, which means that the number of transactions is not so large, and their size is not very large either. This suggests that the real price of Bitcoin is not very high. So, the jump to the $ 5,000 mark was provoked by speculators. This confirms the correctness of the head of financial company JP Morgan Chase & Co. James L. "Jamie" Dimon, comparing the Bitcoin hype with the 17th century tulip mania. In his opinion, speculative capital flows contribute to the inflation of the virtual currency rate. True supporters of an alternative currency consider the concept of virtual gold to be more consistent with the true state of affairs. They don't like drawing parallels between organized crime and their favorite currency at all. And the thought that the formation of its value is directly influenced by illegal drug trafficking and seems blasphemous to them. Is Bitcoin the New Gold? It is basically impossible to use gold to pay off a loan to buy a car or buy a cup of coffee in a restaurant. However, this is a good insurance for significant capital in the event of a collapse of the national currency, since this will not have any effect on the value of the precious metal. History has repeatedly confirmed this thesis, retaining a large number of examples when the value of national currencies tended to zero, and gold continued to be in demand. The real value of gold is significantly lower than its price. This is only due to the fact that most people have managed to find a consensus on its value. It is a similar network effect that Bitcoin needs now in order for it to become even more popular among the masses and expand its distribution zone. With the growing attention to cryptocurrency, its chances of becoming successful are increasing. True, one must understand that the value of the yellow metal, in contrast to the virtual currency, has numerous confirmations recorded in the centuries-old history. The technological revolution is capable of making social norms somewhat different. But to gain universal recognition for Bitcoin's defensive asset status, it will still require something more significant than a group of computer, albeit very erudite, enthusiasts, supported by advertising campaigns that promise to get rich soon. Despite this, there are arguments allowing to discuss the issue of obtaining a gold equivalent with a cryptocurrency. What's in store for Bitcoin Research and consulting firm Thomson Reuters GFMS estimates that the ETF currently owns 2,155 metric tons of the precious metal. If you translate this amount into Bitcoins, then their fair rate will be $ 5,500. The calculation was made taking into account the total number of crypto coins in circulation today, which is equal to seventeen million. With a certain amount of optimism, one can certainly believe in Bitcoin's ability to replace gold bars and coins. If you do not focus on the fact that the dependence of cryptocurrency on electricity speaks in favor of gold, then twenty-four thousand metric tons of the "golden calf" acquired over the past half century can justify the Bitcoin exchange rate of $ 61,000. Given that the cryptocurrency is either destined to win, thereby pushing gold into the background, or to be defeated, slipping to zero value, the extreme volatility of this digital currency can be explained. After all, it freely subsides by 40% within two weeks and recovers by 33% in a few days. So what are the chances for Bitcoin to fail / succeed? If we take as a basis 70% of the cost, when calculating which ETF investments in gold were taken into account, then the cryptocurrency has about 70% chances of becoming a worthy substitute for "paper gold". However, the likelihood that it will be able to displace physical gold does not exceed 6%. Believing in another option is too much, even when it comes to virtual dreamers. The Topic of Article: Bitcoin: zero without a wand, or the newfound holy grail. |
