Bitcoin ($BTC) is known to have wild swings in its value. Investors claim bitcoin’s volatility holds the digital asset back from being widely accepted.
In recent news, Bitcoin leaped above $13,000 on news that PayPal announced that its users would soon be allowed to buy, sell, and hold bitcoin. The unsettled opinion comes from technical indicators particularly the RSI which rose above 80.
The Relative Strength Index (RSI) is a popular indicator for measuring momentum and if an asset is overbought or oversold. A rise above 70 suggest an asset is overbought, and due for a reversal.
Bitcoin is already up nearly 30% this month alone and 80% this year which, considering the market crashed due to lockdown, is very impressive.
Where the public stance is on bitcoin today on a longer term scale, is almost irrelevant. The asset is sometimes dubbed a call on the future of finance, and this is not an over exaggeration.
The Federal Reserve has already announced they will continue to do whatever it takes to keep the economy from collapsing, which means more monetary stimulus and adding debt to the balance sheet. The purchasing power of dollars continues to degrade, and with interest rates held low, asset prices are rising.
Bitcoin is another hedge against future inflation. It checks the boxes: medium of exchange, scarcity. In the case for store of value however, investors will see an appreciation in value over time.
Still have doubts?s
The central banks around the world are already discussing the usage of digital currencies in their endeavours. The Bank of England noted in the executive summary of their Central Bank Digital Currency (CBDC) discussion paper, “CBDC could present a number of opportunities for the way that the Bank of England achieves its objectives of maintaining monetary and financial stability.”
The market cap for bitcoin is just over $240 million. We’re looking at an asset that trades at the level of your average small cap stock, but holds so much more in value if we talk about how the distributed ledger system is shifting the way we transact.
Around the world we’ve entered a recession, and we can expect the true nature of it to show in 2021. This digital asset could be the hedge traders were looking for, in a covid market where we can expect lower yield and portfolio returns.
Hedge-fund manager Paul Tudor Jones deemed the coin “the best inflation trade” on Thursday, reckons its rally is only in its “first inning.”