Bitcoin: the new gold for millennials?

The price of bitcoin has soared in the past year, although experts have warned that bitcoin is a risky asset because of its low liquidity, according to a report on January 10 of the website of Spain’s “national newspaper”. According to the protocol established by the founders to use the cryptocurrency, up to 21 million bitcoins can be produced. Javier Molina, an analyst at eToro trading platform in Cyprus, believes that the number limit is the key reason why bitcoin prices have soared throughout 2020 and early 2021. “Up to now, 18.6 million bitcoins have been issued and 3 million have been lost since it was created, and its largest circulation is 21 million,” Molina said. This is different from the central bank, which can issue money at will and adopt expansionary monetary policy to deal with the economic crisis. Bitcoin is a scarce commodity because its circulation is fixed. ” The view that quantity is scarce has been agreed in the market. Fewer and fewer investors are willing to sell bitcoin. Everyone chooses to store bitcoin in a computer. Therefore, the lack of liquidity can explain one of the inherent characteristics of bitcoin: high volatility. Usually its volatility is three times that of the American stock exchange index, so there is a huge profit and loss risk in bitcoin investment. It’s an investment only for people who know about the product, and, as experts point out, bitcoin should not account for more than 5% of total personal investment. Molina believes that bitcoin is the new gold coin for Millennials. “Like gold, it cannot be used as a payment currency, and it is as scarce as gold,” he said. But it has an advantage over gold for a new generation of people, because cryptocurrency can only be stored on computers. As a result, bitcoin is now more like the same storage currency as gold and is particularly attractive to young people. I think bitcoin is gold 2.0. ” In the past few years, most of bitcoin investors were small investors, but now the capitalization of bitcoin has begun to attract institutional investors who don’t want to miss the event. Dow Jones is already preparing to launch the bitcoin index, and Larry Fink, BlackRock’s chief executive, pointed out in December that bitcoin attracted his attention and that it could develop into a global market, taking on part of the role of gold. It’s not just financial companies that show interest in bitcoin. Driven by the micro technology strategy company of American software company, there is a trend of using bitcoin investment to replace the dollar assets of large multinational companies. Many big companies are likely to repeat this because they have enough liquidity to do so. This will have a huge impact on the rise in the price of the special currency. In terms of the evolution of their prices, these forecasts are very promising. Spanish analyst Raul Lopez commented that the less bitcoin produced (scarce), the higher its price in the market. Analysts consulted by Bloomberg believe that the price of bitcoin may reach $50000, and Citibank predicts that its price will rise to $318000 in December 2021. The world’s central banks are printing a lot of money in an attempt to revive the world economy from the worst recession since the end of World War II, the voice of Germany’s website reported on January 5. Under the shadow of this development, investors try to ensure that they are not affected by inflation, and bitcoin has become their investment object. Bitcoin is now soaring, reminiscent of 2017. At that time, the value of bitcoin soared in less than a year, almost forcing ordinary people to pay attention to this frequently criticized network currency. However, the frenzy soon disappeared, with bitcoin plummeting by 70% in the coming year, which also plunged many small investors into the abyss. Bitcoin’s short history is a history of extreme volatility. In 2011, it rose 110 times to $35 in a few months, and then almost returned to its original position a few months later; two years later, in 2013, its value exceeded $250, and then plummeted again. Later that year, it broke through the $1000 mark at one stroke, and then fell sharply. The only certainty of this development is that the value of bitcoin will always be slightly higher than that of the previous one. Bitcoin fans say this time it’s totally different. In their view, all those previous rebounds were mainly driven by the speculation of small investors, but now, the acceptance of online money has become increasingly high. Indeed, giant financial institutions such as Fidelity Investment Group and JPMorgan Chase group have also given more attention to the online currency. According to a survey of 800 large institutional investors in the US and Europe by Fidelity Investment, about a quarter of them hold bitcoin. Lack of regulation, bitcoin mania leads to crazy predictions. Some estimate that bitcoin will cost $300000. Analysts point out that such estimates are based on the fact that sometimes demand exceeds supply. According to the so-called “halving”, the supply side will be reduced in the future. By halving, the number of bitcoin newly launched will be reduced. In addition, the number of bitcoin into circulation is limited to 21 million, according to the regulations of bencong, the founder of bitcoin. The digital currency is still largely unregulated, which is a major irritant to the fans of the special coin, which in the eyes of others is its weakness. Bitcoin is often compared to gold. In times of crisis, gold is a classic safe haven. But in sharp contrast to online money, the price of the precious metal fell sharply in August 2020, just as the price of gold rose to $2000 an ounce just because of previous concerns about the pandemic. Investors see value such as gold as protection in an era of inflation. Many experts believe that the recent fall in gold prices is a signal that there is less demand for safe havens. After all, the multiple vaccines currently on the market herald the end of the pandemic in the foreseeable future. Bitcoin’s record high shows that digital currencies will not only be used as inflation protection and safe haven, but will continue to be driven by speculation.

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