Bitcoin has become the 20th largest currency in the world. Two conjectures about its future trend

Disclaimer: This article is intended to convey more market information and does not constitute any investment advice. The article only represents the author’s point of view, not the official position of Mars finance and economics. Bitcoin has become the 20th largest currency in the world, two conjectures about its future trend Bitcoin has stood at the top of 28000 US dollars, equivalent to 18000 yuan. Over the past few days, bitcoin has been hitting record highs. By the end of December, bitcoin’s yield had reached 270% this year. If not surprisingly, bitcoin has been the best performing asset since the beginning of this year. According to the coinmarketcap data line, the market value of bitcoin accounts for more than 70% of the total cryptocurrency market value, a new high since March 2017. In just 11 days, the price of a bitcoin broke through eight integer levels, ranging from US $21000 to US $28000. The market value was once 1 trillion yuan higher than that of Maotai, the “king of market value” of a shares. This is “Crazy” bitcoin. BTC has become the 20th largest currency in the world, and bitcoin has exceeded US $28000, making it the 20th largest currency in the world. According to fiatmarketcap data, the market value of “global currency” bitcoin is 18582543 BTC, ranking 20th compared with the global legal currency, but the scale of bitcoin is far from the first and second place RMB and US dollar. At the same time, bitcoin’s market value surpasses visa, the world’s largest financial institution. Bitcoin, with a market capitalization of $499 billion, surpassed visa, which has a market capitalization of $460 billion, making bitcoin the world’s largest financial “company.”. It’s strange to call bitcoin a “financial company,” the only one on the list labeled “worldwide.”. Whether BTC can break through $30000 by the end of the year is only three days away from the end of 2020, and whether bitcoin can break through $30000 has made many people look forward to it. Referring to bitcoin’s recent performance, this may be a high probability event. In the view of many industry experts and practitioners, bitcoin’s recent boom is mainly affected by the trend of the global economy, the impact of the epidemic situation and the sovereign digital currency launched by various countries. At the same time, unlike the surge in 2017, bitcoin’s rise this year is mainly driven by large institutional investors. This round of rise may be because the epidemic situation has exacerbated the expectation of global economic recession again. Global inflation is an irresistible trend. Deflationary assets with anti inflation attributes are scarce resources, and the demand for bitcoin is further increased. In 2020, we have experienced the “pandemic” and “negative oil price” and other black swan events that have not been seen in a century. In order to cope with the economic recession brought about by the epidemic, countries have adopted quarterly loose monetary policy, and interest rates have been lowered again and again. At present, the European Central Bank has implemented a negative interest rate policy, and the federal benchmark interest rate of the United States has been close to zero. Similarly, the total assets of the Federal Reserve and the European Central Bank have nearly doubled since this year to reach $7.38 trillion and euro 7 trillion, respectively. On the one hand, affected by the epidemic situation, the global economic recovery will slow down in the coming year; on the other hand, the central bank has launched extremely loose monetary policy to push up inflation expectations in the financial market. In the high inflation and low growth economic environment, in order to avoid the loss of nominal principal and pursue higher returns, investors’ demand for cash has naturally evolved into the demand for gold and bitcoin. As a result, the market’s expectations of the special currency standardized products have further increased. Many licensed investment institutions have set up digital money funds or applied to the regulatory authorities for trading digital currency, which has boosted the price of bitcoin. On the whole, the apparent reason of bitcoin’s soaring is definitely caused by the shortage of supply, but the key to the problem is why the supply exceeds demand. This may be due to the further expansion of bitcoin production reduction effect. The bitcoin market has a cycle of about four years. At present, bitcoin has gone through three market cycles. In each cycle, we can clearly observe the prosperity and depression, recession and recovery of bitcoin. Bitcoin has been halved twice in history, and every time it is halved, bitcoin prices will usher in a bull market. On May 12, 2020, bitcoin completed its third halving and started its fourth cycle. Intuition tells us that the price of bitcoin will rise after the production reduction. Now we look at the impact of bitcoin production reduction on price in the long run. Assuming that the growth rates of supply and demand of bitcoin are the same over time (from the actual observation, the growth rate of demand is larger, but this factor will not have a substantial impact on our analysis), then it can be seen from the above figure that, as time goes on, the supply and demand curves of bitcoin are moving to the right After the half reduction of bitcoin, the growth of supply slowed down, resulting in the rise of bitcoin price. In the short term, bitcoin fluctuates dramatically. In the long run, bitcoin prices are generally on the rise due to production reduction and increasing demand. Behind the rise in bitcoin prices, halving production is a key factor. Will it collapse as it did three years ago? Will bitcoin collapse again as it did three years ago? The answer is No. In 2020, people’s understanding of the special currency has changed significantly. PayPal users have been able to use their accounts to buy, sell and keep bitcoin. The Spanish foreign bank recently announced the launch of a test, which will be the first trade service offered by the bank to sell and hold digital assets. The new service allows users of the bank to use bitcoin to trade and save. JPMorgan Chase Bank, once known as a “scam”, now believes that bitcoin will eventually replace gold as a safe haven. To sort out the source of the concept change, we must focus on Wall Street. The Wall Street financial community has begun to regard bitcoin as an investment asset, and its status can be comparable with traditional investment assets. This concept is in contrast to 2017. So will bitcoin collapse as it did three years ago? As far as investment is concerned, it’s hard to predict. Everything is possible. However, analysts generally believe that it is the change of people’s ideas and the participation of institutional investors that provide some protection for bitcoin. Specifically, even if bitcoin collapses, it will not be as violent as it was three years ago.

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