Joining other riskier assets in retreating last week, bitcoin is grappling with a 12% decline for the seven days ending Sept. 6, but some market observers believe the world’s largest digital currency is poised to bounce back in a significant fashion.
The idea of decentralized currencies goes far beyond bitcoin and Ethereum. Today, all kinds of companies, organizations, and governments are exploring the concept of initial coin offerings, or ICOs.
Businesses and currencies exist for roughly the same purpose: to facilitate the exchange of value. Fiat currencies like the U.S. dollar are positively primitive compared with the promise of blockchain and the emerging token economy, which some technologists have taken to calling an asset operating system.
“Crypto cynics and finance traditionalists will use the current – and temporary – fall in Bitcoin as an excuse to knock its inherent strengths to fit their own agendas,” said deVere Group founder and CEO Nigel Green in a recent note.
Betting on Bitcoin
There are catalysts for increased bitcoin adoption. Millennials, the rise of China, demand for privacy, rising interest for alternative investments, and headwinds among traditional assets are significant factors that will continue to fuel demand for cryptocurrencies.
Green sees multiple reasons why the case for bitcoin is gaining momentum.
“The first reason is about record-shattering stimulus initiatives. Governments and central banks around the world are continuing to prop-up their economies. Just last week France announced a new $100bn package,” he said. “The off-the-scale level of money printing drastically devalues traditional currencies, which serves to boost the price of Bitcoin as investors look for viable alternatives.”
Bitcoin proponents argue that it is the ultimate alternative asset, combining high potential returns with low correlations and intraday liquidity. Has that held up during the recent market volatility? Other critics believe bitcoin is an asset bubble destined to pop, but some asset allocators see the digital asset as a rising force on the global monetary stage.
While the debate is healthy, issues such as bitcoin volatility don’t diminish the case for the digital asset, but rather enhance it. Critics assert bitcoin’s volatile nature makes it difficult to embrace as a store of value, but it can also be said that the turbulence associated with the digital coin underscores the relevance of its monetary policy.
“Bitcoin’s price will remain on an upward trajectory in 2020 and beyond because the fundamentals haven’t changed– namely that cryptocurrencies are the future of money,” said Green.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.