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Ignore Naysayers, Bitcoin is the New Gold

Bitcoin investors are going through a rough patch right now as the cryptocurrency struggles to hold on to its gains from 2016. The main reason behind the headwinds facing Bitcoin is the government-led probe on Bitcoin exchanges in China. Interestingly, critics are taking the current weakness facing Bitcoin as ‘proof’ that their gloomy forecasts on Bitcoin will happen.

However, that Bitcoin is undergoing a rough patch doesn’t erase the fact that Bitcoin is a disruptive new force. This piece seeks to explore some of the reasons you should ignore naysayers and embrace the hedge that Bitcooin provides as a safe haven on par with gold.

Bitcoin is the new gold

It is no longer news that gold is a safe haven commodity that provides investors with a measure of safety and stability in times of economical and geopolitical uncertainty. Interesting, Bitcoin is shaping up to be another important commodity/currency with a safe haven appeal that leaves gold in the dust.

To start with, Bitcoin’s value as a safe-haven alternative currency became obvious during the 2016 U.S. presidential elections. Wall Street investors have mostly believed that the U.S equities market could crash if Donald Trump won the elections. Hence, when the news of Trump’s victory broke, investors pulled out their funds from traditional assets into alternative assets such as gold and Bitcoin. In fact, Bitcoin surged to towards breaking its all-time record high before the rally eventually slowed down.

More so, Bitcoin is an ‘independent’ currency that is not subject to the oversight of a central control unit. Bitcoin’s independence means that no government can rise up to introduce monetary or fiscal policies to influence the value of the Cryptocurrency. Bitcoin’s safe haven status as an alternative currency lies in the fact that its value is enmeshed in the realities of demand and supply as opposed to fiat currencies whose values can be manipulated at the whims and caprices of a government or its agents.

The fact that the Bitcoin system is built on a network of distributed and dispersed network of computers globally also helps to decentralize its operations. Bobby Lee, the CEO and cofounder of BTCC, a Bitcoin exchange in China agrees s that “the world is starting to realize that, just like gold is a good hedge, bitcoin is a great hedge against the system because it’s outside the system.”

Bitcoin’s reputation for fueling illegal transactions is not factual

Another point that critics often tout in their attacks against Bitcoin is that the cryptocurrency is often used to buy and sell illegal activities. The prevalence of Bitcoin on the dark web and its association with Silk Road has also fueled the flames of its questionable reputation.

However, the fact remains that any currency can be used as payment for illegal transactions and the noise about Bitcoin’s  use in illicit activities is mostly propaganda designed to discredit the cryptocurrency. One of the facts that Bitcoin critics might not want to acknowledge is that other top tier currencies such as the U.S. dollar are used as payment for illegal and illicit activities much more than Bitcoin. In fact, Bitcoin doesn’t cause illegal activities anymore than the U.S. dollar cause counterfeiting, drugs, and kidnapping among other crimes.

 

Here’s Why Bitcoin Might Soar Higher Under President Trump

Donald Trump, the 45th President of the United States is already settled in the Oval office and he has begun implementing some policy changes. However, Wall Street is still somewhat immune to the expected negative effects of a change in the leadership of the American government. Many analysts submitted that Trump’s victory at the polls would cause equities to crash but U.S. stocks have gone on to record new highs.

Market bears also held out hope that the U.S. equities markets will crash once Trump takes the oath of office. However, U.S. stocks have maintained the bullish rally and the Dow Jones is actually staying on course to 20,000. Interestingly, Trump’s victory has a direct influence on the price of Bitcoin because Bitcoin is an alternative currency that provides investors with a safe haven in times of volatility in the economy and in the financial markets. This post seeks to explore how Bitcoin is likely to fare under President Trump.

Bitcoin to shine brighter under president Trump

Donald Trump’s actions, inactions, and words have a huge influence on the global economy and Bitcoin is not likely to be spared from that influence. Nonetheless, it is becoming increasingly obvious that the Trump factor could provide bullish tailwinds for the Bitcoin investment community.

To start with, Bitcoin was the only asset that recorded marked gains on the heels of Trump’s victory in the 2016 U.S. the presidential elections. After Trump won the election, Bitcoin recorded the biggest gain among all financial instruments from under $700 to more than $736 within a couple of hours.  In contrast, U.S. stocks recorded a flash decline before they recovered after investors started warming up to the idea of President Trump.

Of course, realists will be quick to point out the fact that Bitcoin recorded those gains because of an increase in market fears that Trump’s victory will trigger a fresh bout of uncertainty in the global economic and financial landscapes. However, the fact remains that Trump is one of the most controversial public figures in recent times and his position as the president of the United States will amplify the volatility and uncertainty caused by the controversies surrounding his presidency and his policies.

Trump might become sympathetic to Bitcoin

The second reason Bitcoin investors might enjoy bullish tailwinds under President Trump is that Trump might turn out to become sympathetic to Bitcoin. Trump already has Bitcoin supporters such as Mick Mulvaney and Peter Thiel in his team.

For instance, Mick Mulvaney openly supports Bitcoin, Blockchain technology, and the development of cryptocurrency. Mulvaney is tapped as the Director of the Office of Management and Budget in Trump’s administration. Peter Thiel is another outspoken Bitcoin supporter and he has investments in a number of Bitcoin startups. Hence, we can reasonably expect that these men who has the president’s ears could ‘lobby’ for policies that provide an enabling environment for Bitcoin to thrive.

Chinese Bitcoin Exchanges Impose 0.25% Fees To Appease Regulators

Bitcoin investors might want to pay more attention to developments in China going forward because the Bitcoin industry tends to catch a cold every time Chine sneezes. China is one of Bitcoin’s biggest markets and the cryptocurrency has an impressive adoption and market penetration in the country. In fact, analysts have submitted that Chinese Bitcoin exchanges recorded about 42% of Bitcoin transactions globally in 2016.

In the last couple of weeks however, Bitcoin has been facing increased pressure stemming from the Chinese government’s efforts to put a muzzle on the use of Bitcoin in the country. The People’s Bank of China (PBOC) has said that it considers Bitcoin as a commodity (probably on par with gold) and not a currency. The PBOC also hinted that it would step up its regulatory oversight on the use of Bitcoin in the country. The development in China caused Bitcoin to lose its footing from around $1100 to its current $923 trading price.

China’s Bitcoin exchanges impose trading fees to appease regulators

Breaking news on Monday (January 23) shows that Bitcoin exchanges in China are trying to appease regulators by charging a 0.2% fee per Bitcoin transaction starting on Tuesday (January 24). The three biggest Bitcoin exchanges in China, BTCC, Houbi, and OKCcoin have all released statements on their intent to start charging 0.25% per transactions. All the three exchanges in separate statements noted that the reason for the charges is to “to further curb market manipulation and extreme volatility.”

At the start 2017, the People’s Bank of China has called for stricter regulation on the use of Bitcoin in China. The PBOC said it would start investigating Bitcoin transactions in order know the extent to which the cryptocurrency is being used  to aid illegal transactions such as money laundering. Of a truth, many people in China are using Bitcoin to evade the country’s draconian laws aimed to stopping capital outflow from the country.

However, the increased adoption of Bitcoin for transactions and payments at lieu of the Chinese Yuan has reduced the demand for the Yuan and the Yuan is under pressure in the forex markets. For instance, in 2016, the Yuan CNY=CFXS declined 6.6% against the USD to mark its weakest full year performance since 1994. Hence, it doesn’t take much analysis to deduce that the PBOC is mounting pressure on Bitcoin in order to reduce interest in the cryptocurrency.

How far will China’s exchanges go to please regulators

Chinese authorities are worried (and with good reason) that people are using Bitcoin to move their wealth out of China. Hence, they have a strong enough motive to frustrate Bitcoin users in the country. Bitcoin exchanges are businesses and they must remain in the good books of the government to succeed especially in places like China where the government lords it over all.

In addition to the transaction charges, the three biggest Bitcoin exchanges in China have also stopped leverage trades that allow people to do something akin to margin trading with Bitcoin. The ending of leveraged trades will also reduce the speculator element in Bitcoin transactions.

The fact that the exchanges all decided to start charging 0.25 transaction fee (on the same day) suggests that the move was a coordinated action even though the exchanges have avoided hinting that they made the decision under duress. Hence, we can submit that the exchanges won’t mind caving in to some of the demands of regulators inasmuch as the demand would help them stay in business even if it causes a ‘little’ inconvenience for their clients.

Here’s Why Bitcoin Deserves a Place in Your Portfolio

Bitcoin deserves a place in your portfolio irrespective of what ‘smart’ conservative money managers would have you believe. Bitcoin is a disruptive technology because its creates a new market in how financial transactions are handled. Bitcoin also has the potential to disturb the traditional monetary system and eventually displace money (fiat currency) as we currently know it.

Of course, it wouldn’t be wise to sell all your assets to buy Bitcoin or to put all of your investment in Bitcoin; yet, you’ll be doing yourself a major disservice if you refuse to join the bandwagon of early adopters who are investing in the potential of Bitcoin. This article provides insight into some of the reasons why you should endeavor include Bitcoin in your portfolio in order to reap the benefits of diversification.

1. Bitcoin is not a passing fad

Many products and services often come into limelight with a tag for being “disruptive”, only for them to fizzle out of existence after a couple of years. Bitcoin is not a passing fad and it is here to stay. To start with, Bitcoin (built on Blockchain technology) imbibes the very essence of the most disruptive 21st century technologies. Bitcoin has a mobile-first approach, it is open source, it facilitates peer-to-peer transactions, focused on privacy, and encrypted with cryptography. No other financial/monetary product is fortified with all the technologies that give Bitcoin its unprecedented level of usefulness and security.

2. Bitcoin has direct application across hundreds of markets and industries

Many people erroneously assume that Bitcoin is only useful for sending and receiving payments when you don’t want to go through banks. The assumption is reinforced by the fact that Bitcoin was the choice payment system for questionable transactions on places such as Silk Road. Nonetheless, Bitcoin could compete with fiat currencies for direct applications in a wide variety of markets. Bitcoin has direct applications in the $1 trillion e-commerce market, the $515B annual remittance market, and in the $2 trillion annual e-payment market among others.

3. Tech and finance heavyweights already support Bitcoin

Bitcoin is still in infancy and it’s adoption is still a long way off from gaining traction in the mass market. Nonetheless, Bitcoin is already getting rave reviews of heavyweights in the technology industry. Paul Buchheit who founded Gmail has opined that “Bitcoin may be the TCP/IP of money.” Bill Gates, founder of Microsoft says Bitcoin is “a technological tour de force.” Richard Brown, an executive at IBM notes that “Bitcoin is a very sophisticated, globally distributed asset ledger.”

 Heavyweights in the finance sector have also lent their voice to support Bitcoin. For instance, top-tier venture capitalists such as Peter Thiel, Marc Andreessen, and Fred Wilson have invested in the technology.

4. Bitcoin’s adoption is on an uptrend globally

Bitcoin might still be in infancy but its adoption shows a predominantly upward trend globally. The U.S. government is already toeing the path of acceptance and regulation for Bitcoin in the U.S. Bitcoin has earned the title of digital gold in Germany. The adoption of the cryptocurrency has grown rapidly in China and India in response to some of the monetary policies of the government. Available data shows that in Q1 2016, there were more than 13 million Bitcoin wallets to account for a 60% year-over-year increase. More so, the hashrate on the Bitcoin network was 1,028 pth/s to mark a 300% year-over-year increase.