Analysis regarding bitcoin
In my opinion bitcoin as the oldest cryptocurrency in the market, it has been tested over time and shows its strength that it is a viable solution for alternative payment.
To argue other people with the belief that bitcoin is a bubble, there is no intrinsic value to support it; my counter-argument is that US dollar has no intrinsic value under it as well. The US dollar is backed by the full faith of the united states. And the US government have more than 20 trillion debts, and it will be unwise to assume that they can pay all that money back. In an investor perspective, there is no value in the US dollar. Just people do not have the viable alternative, also because people have used to use US dollar in international trading and change habit is very difficult, So, in my opinion, bitcoin can be the US dollar in cryptocurrency. And Ethereum will become the euro of the bitcoin.,
As us dollar has tied to all other currency and the economy of other countries. Bitcoin can become a viable alternative to hedging the currency risk of another country. Like what happened in Zimbabwe Venezuela, local bitcoin price has skyrocketed since the collapse of the local currency. With more adoption of the bitcoin, people might use it to hedge against transactional risk or use by the international company to hedge exchange rate risk, like they are now using derivative contracts. The bitcoin has the advantages of lower cost and instantaneous transaction. Another reason for use it as a hedging option is that the deflationary nature of the bitcoin the total number of the bitcoin is fixed, in the long run, the price of bitcoin is going up. It would be a very good investment vehicle. On the other hand, the bright of the high volatility of bitcoin give people the opportunity to make a profit in the short run, under the assumption that they have done excellent analysis, especially technical analysis. A higher volatility also implies higher risk, so it might be one of the reasons why people have not adopted this payment method. Bitcoin is relatively simple to use technical analysis to predict since the daily volume is not very high compared to stocks and commodities.
The factor of the CME's introduction of bitcoin future. From my analysis of the market, in the short run, people would short the futures contract, and we might see a significant correction of bitcoin price, but it shows a strong support at 6000 dollar range. A 40% correction is reasonable prediction when accounts for higher volatility. And investor's fear of higher than and strong than every growth rate, as the bitcoin exceeds 10000 dollars, a 4000% appreciation in the last five years. The emotion in the market is going to become more bearish, and in the short run the price is going to decrease until it finds a new support level and after stabilization of the market.
Bitcoin as a currency of the planet. This is my standpoint on the bitcoin, in my opinion, bitcoin could be a currency to hedge against all negative event, crisis, or uncertainty in different markets. As market participants increases, the liquidity of the bitcoin improves, and investor maybe feels safer to engage in bitcoin transaction.
Please feel free to leave comments about my research and suggestions how could I improve my research.
This report is prepared by me a finance student, and I’m not a financial professional. All data and opinion is my humble opinion. And it may not be suitable or should be taken completely as investment research.
I have bitcoin on my account.