Before talking about the resilience of Bitcoin (BTC) amid a topsy-turvy economy, let me put a simple question to you first. Have you ever thought if governments can print their own money, literally create more money out of thin air, then why do they need to collect taxes from the people?
In the last 24 hours:
IMF printed $1T
America printed $700B
China printed $100B
Italy printed $27B
India printed $13.5B
South Korea printed $9B
Australia printed $5.4B
Austria Printed $4B
England is going to print $74B
And Japan DOUBLED their printing
Let’s look at the reason why we have to pay our hard-earned Dollars as taxes if governments can print whatever quantity of money just whenever they want.
Governments, taxes, and the value of money!
Governments collect taxes because that is how money gets the value it has. It is not determined by gold equivalence, but the value assigned by the work you do. So, the Dollar’s value is backed by the Proof of Your Work. In other words, you work, get money for that, and give a part of it in taxes, thus giving the currency value, backed by the work you have done.
If we follow this train of thought to its logical conclusion, we will see why we have inflation and why you are getting poorer every year.
When the governments print more money, it reduces the value of the work you do because there is a lot more of the currency available in which you pay your taxes. Every dollar printed is essentially making you poorer by simply reducing the value of work you do.
And where is this New money, which is being printed, go? It goes into saving companies that have failed or have flawed business models. Many industries like banks, airlines, postal services, etc. are always in dire need of bailouts as it is so much easier to make money from the government without fixing the core issues within their systems. And the governments do it by diluting your hard-earned money which just goes into filling their pockets.
BTC – the resilient asset of our times
In this sort of background, it gets reiterated why Bitcoin’s structure is special and why the proof of mining algorithm gives BTC value that the other global currencies simply don’t have.
Lately, the market has lost a lot of confidence, and the circumstances surrounding the global economy have made BTC a very risky asset for now. Institutions always tend to sell their riskiest investments in such collapse or even when there is a sniff of one. That is why first BTC and the stocks fell, then silver and then gold. BTC not being able to hold its value to even around the cost of mining is a strong indicator of the immaturity of the cryptocurrency space. It is simply the result of the untested nature of BTC in such circumstances.
However, looking at the fundamentals of cryptocurrency, there is every hope that BTC will emerge as an extremely resilient asset class from this carnage.
So, can we see a below $5000 valuation for BTC? It could be possible. Uncertainty between the US and China relationship, oil wars in the east, slowdown effect of the economy due to Coronavirus leading to panic and loss of jobs are contributing factors to the global markets experiencing a long dip, making people scramble for cash.
With that said, now is a great time to start buying BTC, all the more because halving is around the corner. Although there were some concerns about crypto mining operations being in trouble, a careful study of this space indicates that the crypto miners would likely be the real survivors. Seems like they have a lot of support to continue to keep the network strong. And to tell the truth, just a 20,000 BTC buy order will be enough to start moving things in the right direction.
The economy will revive as we let go of panic
So, what does this tell you? I think it is time to stop surrendering to panic and it is safe to say that the worst is over!
Life in many places affected by the Coronavirus will soon start returning back to normal even as the isolation period will end and the panic will pass. Even if you look at Italy, or the rest of Europe which had the most impact of the virus, there are a high population of older people, with Italy’s average age being 46 years. At the same time, a lot of places have been dealing with the virus well, e.g. in Singapore, where strict and effective measures are helping things get back to normal.
The virus is not impacting the economy, the panic is. As soon as the panic subsides, soon the news cycles will turn bullish. We live in a world where news need not always be genuine. Perceived or even fake news has more impact on the markets than actual products and reality. In such cases, we need to focus on facts and see where the news is headed to make predictions on investments. Seeing the situation and looking at all the places where panic hit before, things are calming down. This will happen around you as well. It will!
Also, in other news, check out how Bitcoin is emerging as a tool in fighting the virus.