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Bitcoin as a Stable Financial Asset

06/17/2019
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  • Bitcoin
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In an interview with Quartz, Jack Dorsey, the head of Twitter, said that it was Bitcoin that could become the Internet native currency. These words are confirmed by the study of Grayscale Investments, which puts a stake on Bitcoin as on the main reserve asset. In crisis times, the investors began to resort to unusual risks hedging methods.

The Head of Twitter on Cryptocurrencies

According to Jack Dorsey, in the space of 10 years, cryptocurrency has gone the way that the first enthusiasts could not even dream of. Thanks to Bitcoin decentralization, the community was able to preserve the principles embodied in blockchain by its founders. Therefore, the asset showed maximum stability during cataclysms periods.

The basis for the steady Bitcoin growth on the world trading floors was as follows: the emission limitation, the brand awareness, the stable concept and the absence of major technical failures.

In fact, currently the first cryptocurrency has no competitors. It occupies more than 50% of the digital financial assets market, and no other coin can even come close upon this indicator. Although there are blockchains that work faster and allow to create smart contracts that are supported by serious financial injections. However, the principles embodied in blockchain turned out to be insomuch circumspect that new ideas cannot seriously compete with them.

Grayscale Investments Study

Grayscale Investments has conducted a study on the relationship of cryptocurrency costs to international crises. It was found that during the periods of political tension rising, the BTC/USD pair begins to grow. Moreover, even gold is inferior to digital financial assets in its dynamics.

Grayscale Investments experts studied three main periods as follows: the crisis in the Chinese economy of 2015-2016, Britain’s exit from the EU, and the escalation of US-China trade wars.

In recent years, a clear correlation has been observed on financial markets. As soon as tension increases and traditional assets fall, Bitcoin sweeps up. Thence, Grayscale concludes that investor must obligatory have cryptocurrency in his portfolio. They allow to hedge risks over the long run.

Bitcoin’s Possible Competitor

However, in early 2020, a new GlobalCoin cryptocurrency by Facebook is ready to appear. A lot of leaders in their industries showed interest in its creation; such giants as Booking.com, Visa, MasterCard, PayPal and Uber invested in the project. According to estimates, more than 1.7 billion people will receive access to the asset.

Stablecoin will be at the core of Facebook cryptocurrency. Its course will be pegged to a basket of the following currencies: dollar, euro and yen. For this reason, it will not be able to become a direct competitor to the more volatile Bitcoin.

Despite the fact that there will be no direct competition between assets, BTC will get a serious opponent in the fight for liquidity. According to Libra blockchain developers, they actually offer the first banking product on blockchain. Moreover, it is claimed that GlobalCoin should not destroy the traditional system of financial circulation. On the contrary, the project should make it more innovative. It is already clear that the classical economics of credit institutions can no longer exist on the old principles. It is conceivable that GlobalCoin and Bitcoin are laying the groundwork for the further development.

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