Dubbed “digital gold”, why is Bitcoin still heading downwards when physical gold peaks?
For years now, Bitcoin adherents have always viewed cryptocurrency as a kind of digital gold. That is, its value and anonymity can help withstand economic events such as hyperinflation, political events such as war or sanctions, asset control.
There has rarely been a time in world history when such a series of events occurred at the same time of year. High prices for oil and basic commodities have caused inflation in the US and many other economies around the world to skyrocket. Rising tensions between Ukraine and Russia show no sign of ending anytime soon. The United States and many of its allies imposed a series of sanctions against Russia and many of its billionaires.
A number of factors have come together at this point and it should be time for Bitcoin to soar high and prove its role as digital gold. But reality says otherwise.
Despite weak forecasts about the future of the world economy, Bitcoin price continues to fall. In the past month, the price of Bitcoin has fallen by 10%. Ether, the world’s second-largest cryptocurrency, fell 15% in the same period. On the other hand, physical gold prices continue to find new highs and there is no sign that this trend will change anytime soon.
This happens even if Bitcoin is still being used
In Canada, some drivers protested after being threatened with freezing bank accounts that had been donated in cryptocurrency. Ukraine even raised nearly $100 million in cryptocurrencies. Many people also think that Russian billionaires can transfer their assets to Bitcoin or cryptocurrencies to avoid sanctions. But despite the above opportunities, Bitcoin and the crypto world are still standing still, prices are still on the decline and trading volume hasn’t changed much.
The most interesting is the statement from Mr. Alex Bornyakov, Deputy Minister of Digital Transformation of Ukraine. Bornyakov and his team had to work day and night to receive donations of tens of millions of dollars in Bitcoin, Ether and other cryptocurrencies from around the world and use them to buy military equipment.
He admits that one of the most prominent advantages of cryptocurrencies is the ability to raise money quickly even when the banking system is crippled as it is now. Bornyakov, however, is wary of exaggerated claims about the importance of cryptocurrencies for Ukraine:I don’t think cryptocurrencies play a major role. But its role is very important in helping our military.“
Why is that?
One possibility is that cryptocurrencies are still too confusing and unwieldy for most people to use, especially in times of conflict. In Ukraine, for example, many regions have lost internet connectivity, and even the country’s elite are having a hard time converting their assets into cryptocurrencies.
Another possibility – which many Bitcoin skeptics have said over the years – is that cryptocurrencies are too volatile to be a hedge against economic and political upheaval.
Jimmy Nguyen, president of the Bitcoin Association, a cryptocurrency trading organization, said:Over the years, the Bitcoin and cryptocurrency community has spread the false belief that Bitcoin is a safe haven compared to traditional financial markets..” (The association itself promotes Bitcoin SV, a more useful version of the digital currency).
Bitcoin is dead, says Nguyen. Because it is slow and expensive to process transactions, it is difficult to use them for payment purposes. And many Bitcoin proponents argue that its value is more like a reserve asset.
Another explanation for Bitcoin’s underperforming comes from Joe Weisenthal of Bloomberg, who attributes events that appear to be in Bitcoin’s favor in the short term – inflation, sanctions, and geopolitical conflicts – could harm the digital currency in the long term by attracting regulatory attention.
A series of confiscations of digital currency by criminals by the government in recent times shows that Bitcoin or any other digital currency is not really a safe haven before regulators as people think. Therefore, when this event drew the attention of regulators to Bitcoin, its price continued to decline.
Another explanation comes from Sam Bankman-Fried, CEO of crypto exchange FTX. Although he thinks that Bitcoin will “perform better” in an unstable economic and political environment, he suspects that the current decline in Bitcoin price is due to negative information about the digital currency that frequently appears in the market.
She says: “The headlines are mostly negative and unrelated to last month’s post in response to the crypto industry’s claims, which I think have the opposite effect..”
Check out the New York Times
at Blogtuan.info – Source: genk.vn – Read the original article here
