Xu Weihong: bitcoin is being hyped, but digital finance is in the ascendant

Just past the Christmas weekend, the global financial markets staged a thrilling scene, that is, the violent fluctuation of bitcoin trading price: first, it quickly broke through the integer level of 27000 and 28000 US dollars, and then plummeted sharply, causing many speculators involved in it to “explode”. In the past month, bitcoin prices continued to rise by more than 60%. People in the so-called “currency circle” in China cheered and ordinary people were marketed. Could they participate in bitcoin trading? Is the era of digital money really coming? What is the relationship between the digital money services launched by central banks and them? First of all, it needs to be clear that bitcoin is a digital currency, but it is only one of many digital currencies; bitcoin being sought after by some funds does not mean that all digital currencies will be pursued. In my opinion, it is precisely because the concept of digital currency has been “abused” and market institutions have issued too many kinds of digital currency. The global digital currency has been “abused” for a long time, and there are not many digital currencies with real value. Therefore, it is better for ordinary Chinese people not to participate in the transaction of bitcoin and other digital currencies, and not to participate in the issuance of new digital currencies. To be frank, the digital currency issuance that people can get access to is basically a Ponzi scheme. Under the banner of enjoying seigniorage, they can’t copy the wealth story of bitcoin. Secondly, the fundamental reason why bitcoin prices have been rising is that the central banks of the developed economies in the United States, Europe and Japan are too loose monetary policies. To put it bluntly, after the subprime mortgage crisis, developed economies have been overdrawn their national legal currency credit, trying to stimulate consumption and investment by issuing more money to save the economy under the impact of the epidemic. In the financial market, as the three major central banks of the United States, Europe and Japan collectively print banknotes, the national debt of Germany, France and other developed economies has long been negative interest rates – banks can be said to cry and cry for the government to borrow money. Since the rate of return is so low and the risk of stock market bubble is high, global investment institutions are unable to focus on financial assets in Europe and the United States, and they are generally faced with “asset shortage”. This kind of “asset shortage” in developed economies is a headache for global financial investors. As a result, although bitcoin is not a real currency and it is impossible to replace legal tender, it has a high reputation. Many rich people want to “collect” one, which makes bitcoin become an asset worthy of “long-term speculation”, so it has been popular in the market recently. For example, it may not be appropriate for investors to buy bitcoin now, which is similar to buying the works of a famous contemporary painter and showing off as “collectibles”. Although the artist is still working, just like bitcoin is still increasing, his popularity is very high, and the number of collectibles that can be provided to the market in the future is relatively controllable. In this sense, if expressed in professional terms, bitcoin no longer has the property of currency, but has the property of assets. It has the collection value similar to paper gold and artworks. It is an encrypted digital virtual collection. Since bitcoin is a “digital collection” with asset attributes, the transaction price of bitcoin cannot be linked with the real economy, so it is very convenient for speculators to speculate. To put it bluntly, the economic cycle, market cycle, inventory cycle, outbreak of epidemic and other real economic situations have little to do with the trading price of bitcoin. At most, it has something to do with the amount of money in the market. That’s why there are so many rumors surrounding bitcoin market. Ordinary people are often marketed by various “coin circle” stories of sudden wealth People dream of getting rich overnight by bitcoin, but the wealth is evaporated. So, is there really no future for encrypted digital currency? Of course not. The Central Bank of China has officially issued China’s digital currency to cope with the coming digital financial era. There are also many cryptocurrencies in the world that directly serve cross-border settlement and settlement every day, which improves the efficiency of cross-border trade and reduces transaction costs, especially for small and medium-sized traders. China is a direct beneficiary in this regard. In view of this, many countries, including China, such as Switzerland and Singapore, are actively studying how to regulate the issuance and trading of digital currency by financial supervision. It is better to retreat and form a net. The wealth story of bitcoin has entered the stage of virtual speculation, and the era of digital financial services for the real economy has just come. China has a large number of small and medium-sized traders and a large demand for cross-border financial settlement services. In the future, cross-border production capacity and capital distribution need greater potential for financial services. Therefore, it is in our interests to make full use of the technical credibility of cryptocurrency and check and balance the current world financial currency pattern monopolized by US dollar. From the perspective of policy promotion, we should encourage southeast coastal cities, especially in Zhejiang Ningbo, Fujian Quanzhou and other small and medium-sized foreign trade enterprises gathering and folk finance active. Private institutions should be allowed to issue encrypted digital currency. Regulatory authorities should issue formal licenses, standardize service content, cooperate with the central bank’s digital currency, participate in global digital currency competition, and jointly promote digital gold with Chinese characteristics Financial development, so that finance can better serve the real economy. (the author is chief economist of Yongxing securities)

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