Author: promise
In just three days, the “cannot continue printing” Bitcoin rose by 20%. In the early morning of December 21st, Bitcoin has come near 24,000 USD.
An analyst at Zhongtai Securities released a report last night that people are willing to hold banknotes because of scarcity. When a large number of banknotes are printed and the value behind them shrinks significantly, people will look for new commodities to realize the function of currency. At that time, buying gold, Maotai, core stocks, and core real estate all followed the same logic, which was a process of re-searching for scarcity.
Bitcoin has “victorious” over the legal paper currency issued by many national banks around the world. The currency devaluation caused by the impact of the epidemic has caused the Turkish paper currency lira to depreciate by more than 25% this year, resulting in a substantial increase in Bitcoin transactions in Turkey, Nigeria, Venezuela, and Iran. Similar to the situation in Argentina, the Argentine peso issued by the Bank of Argentina continued to depreciate. In October of this year, Argentina’s inflation rate exceeded 35%. Affected by this, Argentina’s domestic funds switched from paper money to Bitcoin, which led to the price of Bitcoin in Argentina. More than 33,000 US dollars, 40% premium to the normal price of global bitcoin.
Affected by the depreciation of paper money, Standard Chartered Bank and Citibank began to support Bitcoin. Citibank executive Tom Fitzpatrick said that Bitcoin is the new gold and the supply is limited. He expects Bitcoin to rise another 12 times next year, that is, every Bitcoin The price will reach 318,000 US dollars by the end of 2021.
Unable to “continue printing” to boost Bitcoin
In the early morning of December 21, driven by strong funds, the price of Bitcoin reached 24,000 US dollars, which means that it only took three days for Bitcoin to rise again by 20%, from 20,000 US dollars to around 24,000 US dollars.
As of press time, the market value of Bitcoin has reached a staggering 2.88 trillion yuan, and the global market value of cryptocurrencies totals 4.49 trillion yuan, which means that the market value of one type of Bitcoin accounts for 64% of the entire market.
“The nature of Maotai, housing prices, and Bitcoin’s rise is the same.” Zhongtai Securities Chief Macro Analyst Liang Zhonghua released a research report on the evening of December 20, saying that when currency oversupply will slow down, it will constitute a short-term impact on asset prices. Impact, but looking longer, the dilemma of Chaofa is difficult to change. And as we mentioned earlier, when paper money is no longer scarce, the belief in currency is also facing unprecedented challenges. The market will spontaneously look for long-term survival and long-term scarcity assets and find new “currency”.
Liang Zhonghua believes that the most critical aspect of maintaining currency beliefs is “scarcity.” Shells were also used as currency in primitive society. That is because people discovered that a shell also requires a lot of labor and time. Shells are scarce, which determines that these shells have intrinsic value. But if humans go to the seaside and find endless shells everywhere, the shells become worthless, and people start using other scarce commodities as currency.
In his research report, he emphasized that people are willing to hold banknotes when the value behind the banknotes corresponds. When banknotes are printed unlimitedly and the value behind them shrinks significantly, people will look for new products to realize the function of currency. . This is a very important reason why scarce assets will rise as soon as the currency is over-issued. In this sense, when the currency is over-issued, buying gold, Maotai, core stocks, and core real estate are all the same logic, which is a process of rediscovering scarcity.
The scarcity of Bitcoin is its main feature that distinguishes it from banknotes, tulips, and shell coins. Unlike the latter three assets, which can be printed and produced indefinitely, there are only 21 million bitcoins in total, and they cannot be increased.
But in fact, due to other factors such as forgetting the password, the number of bitcoins circulating in the market is far less than 21 million.
A research data also pointed out that since January 2012, about 2.4 million bitcoins have not been in a liquid state, and these coins are considered to be the lower limit of the estimated number of lost bitcoins. In addition, about 5 million bitcoins have not been in a liquid state for the past 3 years, which is considered the upper limit of the estimated number of bitcoins lost.
In other words, the number of lost bitcoins is estimated to be at least 2.4 million and at most 5 million. These lost bitcoins have stimulated scarcity and raised market expectations. In the stock market, this is equivalent to shrinking shares.
Paper currency depreciation is serious, residents from many countries flood into the Bitcoin market
Bitcoin has defeated the legal paper money issued by many national banks in the world.
In Venezuela, where inflation is severe, local Pizza Hut has begun to accept Bitcoin payments.
The media quoted people familiar with the matter as saying that the Central Bank of Venezuela is considering printing a sovereign bolivar with a face value of 100,000, which will be the country’s highest denomination currency so far, but a 100,000 sovereign bolivar can only be exchanged for US$0.23. Three years ago, a 100,000 banknote was equivalent to 2.5 US dollars.
According to people familiar with the matter, the country imported about 71 tons of banknote paper from an Italian printing company under Bain Capital this year, and the country’s hyperinflation has caused cash shortages.
As the largest economy in Africa, Nigeria, with a population of more than 200 million, has seen a significant increase in peer-to-peer Bitcoin transaction volume. According to data from Bitcoin research agency Cointelegraph, the country’s Bitcoin transaction volume has been second only to the United States as of mid-December 2020. Ranked second in the world, a major factor is the continued devaluation of Nigeria’s paper currency. Only in July of this year, the Central Bank of Nigeria announced a one-time devaluation of the official exchange rate of the country’s currency, the naira, by 5.5%, from 1 U.S. dollar to 360 naira. Pull adjusted to 1 U.S. dollar to 381 naira.
Paper currency is also difficult to gain the highest trust in Argentina. Due to the devaluation of paper currency caused by the impact of the epidemic, the exchange rate of the Argentine peso issued by the Bank of Argentina has been falling against the US dollar. In October this year, Argentina’s inflation rate exceeded 35%. The people of Argentina turned to holding Bitcoin to avoid currency depreciation, causing the price of Bitcoin in Argentina to exceed the international average, and there was an alarming premium.
According to Trading View data, the local Bitcoin in Argentina has surpassed $30,000. According to Crypto Compare data, the highest price of Bitcoin in Argentina reached 2,841,647 pesos. Converted at the 0.01177 exchange rate between Argentine banknotes and the US dollar, the quoted price reached 33,446 US dollars, compared with the average price of 24,000 US dollars on major Bitcoin exchanges. , The premium is as high as 40%.
The price of Bitcoin next year will exceed 310,000 US dollars?
Due to the frenzied printing of money by the Federal Reserve and the continued depreciation of banknotes in some countries, the belief in the scarcity of banknotes has been questioned. Bitcoin, which cannot be increased in supply, has recently attracted attention from banks.
Standard Chartered Bank CEO Bill Winters recently believed that the adoption of digital currencies is “absolutely inevitable.” He said that both private digital currencies and state-backed currencies will play a role in the economy and society. At the same time, Standard Chartered Bank subsequently announced that it would launch an encrypted custody service to support multiple cryptocurrencies including Bitcoin and Ethereum.
It is reported that Standard Chartered Bank has cooperated with Northern Trust to launch a mutual encryption currency-related project Zodia. In the initial stage, Zodia will provide custody services for some major cryptocurrency assets traded on major digital asset exchanges (such as Bitcoin and Ethereum). The list will also include XRP, Litecoin and Bitcoin Cash.
Citibank executive Tom Fitzpatrick predicts that the price of Bitcoin, the most valuable cryptocurrency, will reach $318,000 by the end of 2021. In a report entitled “Bitcoin: Gold in the 21st Century”, he stated that the price of Bitcoin is likely to rise sharply. The current trend of this “digital gold” is similar to that of gold in the 1970s.
The above-mentioned bank executive explained that gold would also benefit from inflation, but Bitcoin does not have the limitations of gold. He pointed out, “Gold has limitations such as unchanging storage and non-portability. Bitcoin is the new gold. Bitcoin has a limited supply and is easy to transfer across borders, and the identity of the owner is not disclosed.”
Although the entry of institutional investors is considered to be the main driving force for the strong rise of Bitcoin, previous research data showed that about 10% of institutions began to allocate Bitcoin to varying degrees, and the data given by the world’s largest fund company Fidelity Fund To be more exaggerated, Fidelity Fund’s research stated that a survey of nearly 800 institutional investors found that as of the end of the second quarter of 2020, 36% of institutional investors held cryptocurrency assets.
The interests are ripped apart, and there are huge differences between institutional investors on Bitcoin. Some of the world’s top financial institutions have obviously entered the market early, holding Bitcoin assets indirectly or directly, and benefiting from it hugely, but on the other hand, many Financial institutions believe that the value of Bitcoin should not be exaggerated, at least it cannot replace gold.
Goldman Sachs believes that although Bitcoin has some alternative properties to gold, it does not believe that the growing popularity of Bitcoin will pose a threat to gold’s status as the “last currency”.
The aforementioned financial institutions emphasize that large institutions are basically far away from Bitcoin due to the “transparency issue” of digital currencies. The speculative trading of retail investors makes Bitcoin an excessively risky asset. Bitcoin is only a retail reinflation transaction, while gold is a kind of Defensive assets for long-term actual capital preservation.
According to data from Coinhills, the current proportion of bitcoin-to-fiat transactions in US dollars is 69.56%, ranking first; Japanese yen is second, accounting for 21.42%; Korean won is third, accounting for 3.57%; ranking fourth The five places are the Euro (2.59%) and the Turkish Lira (0.99%).
