Bitcoin price may be stable, but its adoption is surging
If 2020 came with a catchphrase, words like “uncertainty” and “instability” would almost certainly be a part of it. What started with a global pandemic kitchen fire, became a raging inferno of societal instability. The economic downturn and joblessness resultant of the illness laid bare some of the more sinister underpinnings of global infrastructure. Leaving many more concerned with the security of a wildly uncertain future. Luckily, Bitcoin is an expert when it comes to navigating volatility and an uncertain future.
Bitcoin, created in the darkest days of one of the biggest recessions seen to date worldwide, knows how to address some of the major systemic issues of economic structure. Structures that have also led to its rhythmic collapse. Moreover, the cryptocurrency has been actively advocating for ubiquitous adoption since its advent. Thanks largely to the efforts of users, widespread dissemination of inclusive information, and even exchanges and trading platforms like Bitvavo– purpose-built for encouraging new users to gain traction in the market. Bitcoin can be viewed as a better alternative to the systems that seem to routinely fail. And 2020 so far has done nothing but shore that premise.
Growing Distrust in a System
Discussions regarding the “assured” downfall of bitcoin values following the halving and economic fallout following the coronavirus, being resoundingly rebuffed following bitcoins latest performance. But these sorts of doomsday scenarios regarding bitcoin valuation are nothing new, as many vocal critics of bitcoin have been predicting the end of cryptocurrency since widespread adoption in 2017.
What many of these criticisms have failed to address is the ever-increasing inflation of the US dollar and many other fiat systems. A concept that many crypto users and proponents are acutely aware of. Americans, and surely many other countrymen, face one of the biggest quantitative easing schemes ever seen. Making the few fully informed seriously questioning the future of the dollar, one of the world’s most trusted and reliable currencies.
Quantitative easing, a monetary policy set into motion by governments that causes central banks to buy government bonds or other internal financial assets to stimulate the economy and expand economic activity. However, in instances of high economic distrust, the policy can function more or less effective than planned. Resulting in prohibitive inflation and deflation later on. If banks are hesitant to lend and potential buyers are unwilling to borrow, or when quantitative easing fails to improve economic sentiment, then the result is a too saturated market. Especially in such cases that the amount of easing required is overestimated, or when too much money is created by purchasing liquid assets.
Bitcoin has been seen in other countries, like Venezuela and Argentina, to be a security that is capable of offering much-needed protection against the debilitating inflation and deflation that excessive quantitative easing programs can catalyze. Functioning more as a safe haven asset than a digital currency. This is largely due to how bitcoin created and retains its own value. As a fully decentralized currency with a strict artificial scarcity framework, bitcoin is all but immune to quantitative easing practices. As a borderless currency, bitcoin offers these types of protections to anyone anywhere in the world.
Safe Haven Assets
Despite the term, and it’s inherent viability, being hotly debated, safe-haven assets are those that are considered to be “recession-proof”. Although, this is a bit of a misnomer, as any and all supply is somewhat dependent on demand, and if a recession is bad enough, demand will fall regardless of the asset. Such was seen in the few weeks following the coronavirus settling into global economies. Even gold prices fell. The misconception that these markets continue to thrive during economic duress is widespread, but the truly defining behavior of safe-haven assets is actually how they rebound following a market shakeout.
Bitcoin, much like gold, has bounced back to pre-crisis values and continues to hold strong without regular injections through quantitative easing and other stimulus programs. In short- it hasn’t relied on the government to bail it out. It’s come back entirely on its own. Which may serve to further prop up the idea that it is a safe haven asset, and could very realistically act as a hedge to future economic disruption. Which could provide a genuine answer as to why the coin has been behaving in stark contrast to almost all other cryptocurrencies since the beginning.