At the time of writing, Bitcoin was approaching a new high of $ 20,000 USD for bitcoin. What has changed since you last reached this peak?
The Covid19 situation has changed the way people do a lot of things. Technology is at the forefront of everyday life. Things that used to be done physically are now being pushed into the virtual world – training, eating out, entertainment, work and buying a lot of goods and services. The natural adaptation to this type of program is the use of cryptocurrencies. Why? They are a continuation of the technologically controlled world. They can also be used to compete with the existing financial system at a potentially lower price.
The last time Bitcoin reached its record high, many institutions demonized cryptocurrencies as payment methods used by criminals for terrorism, money laundering and drug trafficking. Mastercard and Visa currently associate cryptocurrencies with their credit cards, and Paypal now accepts Bitcoin to be used on its platform. Many governments are talking about issuing cryptocurrency versions of their traditional currencies. There was also a push from Facebook, which has partnered with major banks and other institutions to issue a cryptocurrency called Libra, which has not gone very far, but the intention is there. Cryptocurrencies are no longer for criminals unless the aforementioned institutions commit crimes.
The key to any technology is widespread or mass adoption. The more people use something, the more demand there is for its use and the more important it will become. With widespread acceptance, the systems that work with the product are also beginning to change. Take Apple iPod, Microsoft Windows, ISPs and electric cars as examples. With the new demand will come new industries and products that are not very useful without the acceptance of the original product.
Vulnerability of traditional investments
Due to the Covid scenario and the depression that is developing, investments in stocks and bonds become quite expensive and carry a higher risk, as the main economy is excluded from the performance in these markets. High levels of debt make real estate investments more risky than in the past, as well as volatile rental incomes and people’s ability to pay for their mortgages. Cash is a safe haven, but rising debt and inflation prospects mean that money is also at risk. The concept of diversification means that these investments must be held back to some extent, but there is now a longing for an asset that complements these products. This new asset is cryptocurrencies. This product allows diversification from excessive debt, currency devaluation and high inflation.