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This story originally appeared on Alto Nivel
The narrative in bitcoin is cyclical, and given its extreme volatility, it is normal: when it plummets from highs, its detractors talk that the most popular of cryptocurrencies “has no future and is dead .” On the other hand, when it approaches or achieves new price records, its apologists begin to talk that it will go up 10, 100 or a thousand times more.
What is the reality? That bitcoin is a monetary experiment with less than 12 years of life, of which nobody knows if it will manage to consolidate itself as a globally accepted system for electronic commerce. That, let’s not forget, was the purpose of its creation, which, however, will not be achieved as long as its high volatility continues to make it unfeasible for the establishment of prices convertible into currency at a more or less stable exchange rate.
Perhaps one day bitcoin will achieve such stability, but in the meantime, the truth is that amateur and professional investors will continue to use it as an ideal instrument for ‘trading’ (buy / sell) that allows achieving large profits (and losses) fast.
In short, we must not be guided by emotional extremes but by the fundamentals of supply and demand for bitcoin that are increasingly stronger and that, as in other instruments, mark their greatest long-term trend.
For example, last October the company Square Inc. made a massive purchase of 50 million dollars in bitcoins. He did this by considering “that cryptocurrency is an instrument of economic empowerment and provides a way to participate in a global monetary system, which is aligned with the purpose of the company.”
Square is an American company specializing in financial services, mobile payments and services for small businesses, based in San Francisco, California. It has been listed as a public company on the New York Stock Exchange since November 2015, but what stands out is that it is a large global technology corporation that adds bitcoin to its balance sheet .
But in addition to Square, new companies have joined the adoption of bitcoin this year, such as the giant of electronic payments, PayPal, who announced at the end of October that its users could buy bitcoin and other cryptocurrencies such as ETH, Bitcoin Cash and Litecoin.
Likewise, with the arrival of the COVID-19 pandemic, there have been phenomena that, on the one hand , have favored both trade and the use of the different existing forms of electronic money.
Confinement, “healthy distance”, the habit of avoiding direct contact between people, including handling cash, is pushing more and more people to use commerce and digital means of payment.
On the other hand, the cessation of economic activities that has precipitated the worst global crisis and recession in a century, has forced governments and central banks around the planet to launch an “atomic bomb” of fiscal and monetary stimuli that will cause inflation of new financial bubbles.
Because of this, which is already the largest monetary and debt injection ever, the assets in which to invest are those whose demand will continue to increase because, when financial bubbles burst, they will provide their holders with ample product returns. From the desperate search for a solid haven of value .
In these assets count of course strong currencies (dollar, euro, yen), gold and silver as well as bitcoin, cryptocurrencies and real assets.
In short, we must avoid falling into the error of discrediting bitcoin. Cryptocurrencies are here to stay, and with their increasing adoption by big players and retail investors, their uptrend will continue to strengthen their prices to unpredictable levels.