This Is The Perfect Environment For Cryptocurrencies To Continue To Thrive
Seemingly every week, we hear about Bitcoin or any number of the Altcoins making a new all time high.
A trend that I don't see changing any time soon.
You can't flip on a TV Finance channel without someone commenting on how high Bitcoin is and how it is likely to crash back down to earth shortly, leaving a trail of heartache in it's path.
However, when looking at the current environment I think they could be very wrong, dead wrong in fact.
Bitcoin has made many millionaires over the past few years and many more just in the last couple of months.
Even our beloved Steem has made a couple of millionaires as of late.
A recent post by one can be seen here:
https://steemit.com/steemit/@trafalgar/3-months-1000-followers-and-usd1-million-later
Taking all that into consideration, why would I think that this rally in the virtual currency space isn't going to be stopping any time soon?
For many reasons actually, but for this post I want to focus on the current economic and political environments as major reasons.
In many ways, this is really the perfect environment for virtual currencies to dominate!
Low Interest Rate Environment
Right now we are in an extremely low interest rate environment. An environment that could remain for quite some time.
Traditionally in low interest rate environments, risky assets tend to trade at a premium.
We see that all the time in the kinds of stocks that get bid up in low interest rate environments vs. the kinds of stocks that tend to catch bids in a higher interest environment.
Growth stocks trade at inflated multiples during low interest rate environments while the blue chip dividend payers often trade at slightly depressed multiples. That completely flips when interest rates are high.
Bitcoin is the ultimate speculative asset currently and in this environment there are those out there willing to take on Bitcoin as a carry trade.
If you are not familiar, a carry trade can be defined as:
"A strategy in which an investor borrows money at a low interest rate in order to invest in an asset that is likely to provide a higher return. This strategy is very common in the foreign exchange market."
As money struggles to earn much of a return in this kind of environment it will easily flow into things that are more speculative in nature.
Government Mistrust Around The Globe
People haven't trusted their governments for decades, but we might be at an all time high regarding mistrust currently. I am not even talking about just what is going on Washington, take a look overseas.
Japan has been pouring new debt onto old debt by issuing bonds at record low interest rates. The treasuries yield next to nothing even though it's current debt load is close to 250% of GDP. Something about that doesn't sound quite right.
Investors overseas are deciding that instead of holding these non yielding (or basically non yielding) bonds, they would rather try their hand at owning some Bitcoins.
Take a look at the governments in India and Venezuela who just went in and got rid of old currency notes a couple months back. Nothing breads mistrust like a government telling it's people the currency you are holding is soon going to be worthless so you better exchange it now.
Ironically, the moves by the governments in these countries happened right about the same time that the cryptocurrency space started to take off, coincidence?
Millennials Love It
In general the millennials understand Bitcoin. They understand digital money. It's what they have grown up with and to them it makes sense.
It makes more sense than investing in something like a piece of gold for practical reasons as well as plain old investment reasons.
For one, gold's supply is ever increasing. As the price goes up, more supply comes onto the market as there is more of an incentive for miners to go get it out of the ground.
Bitcoin on the other hand has a limited and known supply. There is no government intervention that can suddenly change that supply. The supply is what it is and it is known in advance.
Also, how much easier is it to make a transaction in something using a digital currency like Bitcoin as opposed to carrying around some gold in your pocket?
Infinitely easier!
And you know the millennials, we are all about easy! ;)
Conclusions:
For the reasons stated above I don't see the current price trends in the virtual currency markets to be ending any time soon. No matter how elevated the prices have been in the short term.
There are simply too many tailwinds at their back. Until the environment changes significantly, and many of these tailwinds go away, my price prediction for the cryptocurrency space is and continues to be...
Higher!
Stay informed my friends!
Sources:
Image Sources:
https://veewords.wordpress.com/2013/04/09/the-movie-that-started-it-all-v-for-vendetta/
http://blog.capital.org/tag/millennials/
Follow me: @jrcornel
Excellent article, very well written. Thanks for sharing! Yes, the society we are on today created a perfect environment for crytocurrency to grow. Technology and internet are the two main reasons in my opinion. However, it is important for people to also earn money in a safer and traditional way, so we don't lose everything when something bad happens to crytocurrency
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a good point. i prefer precious metals as a hedge to cryptos and legacy fiats. i don't feel the debt based system of stocks and loans is a reliable container anymore. we are witnessing both people on the street and those in the finance industry flee their wealth into cryptos.
the reasons for this have become numerous, it's not simply a matter of technology anymore. important countries like China, Russia and others have been totally fed up with the petro-dollar system. future technology (Tesla among others) is imminent that will obsolete oil rather quickly and change our lives in so many ways. the fracturing of the EU, the political/media insanity of the US, the fact that the existing system is propped up by nothing but debt, new leaks every month shaking the foundations of trust in our governments.
crypto has been ready for something like this all along. it's a great time to be alive and involved!
Steem's time has yet to come. Zappl launching soon. And many other open-source based on Steem launching too. I'm thrilled to be a part of this crypto endevour and will be inviting people to join. At least those who don't consider every online money creating opportunities - a scam. The most important part is that on Steemit I have a feel like I'm part of one giant family where we care about eachother in many ways. That's why Steemit is so much more entertaining and beautiful than simple crypto exchanging. We all give contributions to this project, no matter how small or big they are, they still help Steemit growth, wellbeing and development. Thanks for a nice reminder of crypto status and your opinion @jrcornel
Zappl looks promising!
More and more people are coming in to cryptos so to me it's going higher too.
I agree with that. The cryptoverse will "inflate"!
This is so good to read, so encouraging for many on here and can only agree with you: the political and social-economical atmosphere is ripe for crypto-currencies and we all get the rewards, especially if we are into the most powerful platforms, as well as the King of Popularity, Bitcoin.
Thanks for another excellent piece, excellent information and positivity. Namaste :)
Bitcoin was created in reaction to the 2008 financial crisis and I think it has a bright future because the issues that caused the crisis have not been fully solved. Many people now realize that 'money' supply and interest rates can and will be manipulated by the government as needed and that the only real value is in assets, be it shares, gold or real estate. Those assets however are difficult to use as currency, so there is a need for a liquid store of value that is shielded from government interference but easy to use and move around. Cryptocurrencies will fill that role.
I agree. Great comment by the way!
fingers crossed to "higher!"
I agree, as well! Good post.
Agree!, seems like prices are going to continue to rise for the moment... I think we are in a time where paradigms are shifting...
Government mistrust has a lot to do with what's fueling this. I talked to a friend from college and he said: "All cryptocurrencies are are blips on a computer." I asked him- what do you think money is? Who do you trust, the government or people? I'll take people... the govt has a track record (and we know what that is!)
we are getting into another crisis and at least for now they're really feeling it in Europe.... You should see how european banks are stock piling bitcoin as for the younger generation they're really thriving in the japanese btc market. We are soon to follow here in the states as you can see on google trends how the keyterm bitcoin has become a popular search term
The technology is solid and has the potential to change the way we do MANY things... and then there's the fact that we're still on the bleeding edge of any kind of mass adoption, so there's a LOT of money that could potentially flow into the market.
Now, it BTC always going to stay the "big dog?" Probably not. For all I know, 20 years from now we'll be looking at a set of alt coins that don't even exist today.
Don't get me wrong, i'm not disagreeing, but there is something that worries me, and that is the muted reactions of the banksters. Bitcoin and the technology behind it are their biggest threat. They stand to loose their control and it seems they are doing nothing about it. Given the power they have, they could easily shutdown exchanges and make bitcoin value plummet. The fact that they are going along with it, seems weird to me and it raises a red flag. What's your thought on this?
If peer-2-peer is stoppable, wouldn't the music industry have stopped it already?
Of course, exhanges could be attacked but based on what reasons? It would lead to lots of debate. And what is gained if cryptocurrency is pushed underground so that visibility is completely obscured?
I think the first genuine pushback will come if too many ICO's lead to too many scams. But regulating the Internet is difficult.
Reasons for shutting down bitcoin exchanges? How about saying that bitcoin is used for sponsoring terrorism? They can come up with an investigation after a major terror attack and say that it was funded with bitcoin and make it illegal. In the aftermath of a tragic event, people who are so easily manipulated, could see bitcoin as a bad thing.