Bitcoin Price Has Changed, but Its Fundamentals Have Not Changed
The economic crisis is taking hold, but Bitcoin’s fundamentals remain unchanged.
The economic crisis that most economists have been expecting for months is finally starting. The coronavirus, and its rapid spread around the world, has simply acted as a catalyst for the sharp fall in financial markets that we have been witnessing since March 9, 2020.
Sooner or later, these financial markets artificially inflated by the policies of monetary creation and low interest rates of central banks were doomed to collapse.
This developing economic crisis is causing panic among a majority of people. In times of collective panic such as the one we are currently experiencing, the number one priority for 99% of people is to recover as much liquidity as possible.
Logically, we are therefore witnessing a liquidity crisis that is having a major impact on all the liquid markets on the planet. On Wall Street, the Dow Jones has lost 20% of its value over the last 5 days. Over the past month, the Dow Jones has fallen by around 30%. The S&P 500 is undergoing the same correction as well.
Elsewhere in the world, the situation is exactly the same. Gold, which has been the safe haven value in times of crisis for several centuries, has even lost more than 10% in recent days.
When everyone panics, there is no longer any safe haven.
Under these conditions, Bitcoin price falls as well. It could not be otherwise. Bitcoin is a liquid market. In fact, Bitcoin is the only truly free market in the world.
Even when it loses $60 billion in capitalization in a matter of hours, Bitcoin continues to operate so that its users can find the equilibrium price themselves.
Some opponents of Bitcoin are quick to draw two conclusions, which I believe are false, as a result of this fall in Bitcoin price:
- Bitcoin is not a real safe haven in times of crisis.
- Bitcoin is an asset that is correlated to gold, or to the financial markets.
I don’t think you can draw such conclusions over such a short period of time. The safe haven status of an asset can only be measured over the long term. Similarly, the possible correlation of Bitcoin with other assets can’t only be considered over a period of 5 days.
Bitcoin’s opponents therefore need to review their copy, and take a step back to see the bigger picture.
By taking a step back, they will be able to understand that while Bitcoin price has changed, its fundamentals have not. Bitcoin’s fundamentals as of March 17, 2020 are the same as those of Bitcoin as of March 1, 2020.
And Bitcoin’s fundamentals remain excellent which still gives me reason to be optimistic about the future of Bitcoin.
Bitcoin Is As Scarce as Ever
Bitcoin price has gone from $9K to $4K in just a few hours over the past week. At the time of writing, its price has stabilized around $5.3K. The situation is chaotic, and the panic that has set in could cause the price to drop below $5K again.
Nevertheless, whatever its current price, Bitcoin is as scarce as ever.
Bitcoin is still the scarcest decentralized invention ever created by human. No matter what happens, Bitcoin will not change the maximum supply that can be put into circulation.
There is no leader in Bitcoin world that will be able to change the fact that the maximum number of Bitcoin is 21 million.
When the crisis has set in, minds will calm down, and people will move to safe havens. Gold, and Bitcoin, will resume their role as a safe haven. Bitcoin price will rise again, and those who seize the opportunity of buying a $4K or $5K Bitcoin will be greatly rewarded.
As always with Bitcoin, in order to take full advantage of it, you will need to have complete confidence in its revolution.
Bitcoiners can show this kind of true confidence. Are you able to do the same? Only you can answer this question and make the best decision for your future.
Bitcoin’s Monetary Policy Is Always Unique
Bitcoin was created by Satoshi Nakamoto at the end of 2008 in response to the recent banking and financial crisis. Well aware that the monetary and financial system had reached its limits, Satoshi Nakamoto decided to officially launch the Bitcoin experiment on January 3, 2009 with the following message within the genesis block:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.
So you can consider that Bitcoin has been created for the situation we are going to experience in the coming weeks and months.
Bitcoin must be seen as the only credible alternative to the current system. It is your best chance to escape the progressive collapse of this system.
By creating Bitcoin, Satoshi Nakamoto wanted to stimulate the behavior of a commodity such as gold. Thus, the more time passes, the more difficult it becomes to create new Bitcoins.
The creation of new Bitcoins is halved for every 210,000 blocks of transactions added to its Blockchain.
Originally, 50 BTC were created for every transaction block added to the Bitcoin Blockchain. Today, only 12.5 BTC are created. In May 2020, the third Halving in the history of Bitcoin will take place. After this third Halving, only 6.25 BTC will be created for every block added.
The daily creation of new Bitcoins will thus decrease from 1800 to 900 in what will be a real monetary shock to the Bitcoin supply. This monetary shock will ultimately lead to a strong increase in demand for Bitcoin, which will in turn increase the price of Bitcoin.
This single monetary policy is the great strength of Bitcoin compared to the current monetary and financial system. After this third Bitcoin Halving, the annual inflation of the Bitcoin supply will definitely drop below 2% to 1.8%.
In the future, annual Bitcoin supply inflation will tend towards zero, and will reach zero in 2140 when all Bitcoins will have been mined.
Bitcoin’s monetary policy protects what you own. It offers you an extraordinary guarantee for your future. It is still in effect today when the Federal Reserve has just decided to inject more than $700 billion into the U.S. banks.
The Federal Reserve has a lot to learn from the way Bitcoin works, in my opinion.
The Bitcoin Network Is Still Completely Decentralized and Leaderless
At the heart of the crisis, Bitcoin remains the most decentralized payment network in the world. Anyone can join the Bitcoin Blockchain and become a node in the network. The Bitcoin Blockchain is still permissionless and trustless.
No leader at the head of Bitcoin can arbitrarily prevent you from joining the network.
In Bitcoin world, all users are equally important. All this makes Bitcoin resistant to attempts by the powerful in the current system to stop it. There is no one to sue for trying to stop Bitcoin.
No one can stop you from using your wealth in Bitcoins as you wish. The transactions you decide to make cannot be censored by a third party.
At any time, you may decide to sell all of your Bitcoins if you wish.
This is why Bitcoin saw its price drop so dramatically on March 12, 2020 from $8K to $4K. Bitcoin works permanently by letting its users decide its equilibrium price.
Here again, Bitcoin shows its superiority over Wall Street, which constantly halts trading as soon as stock prices fall too sharply.
Wall Street’s behavior on this point is much closer to socialism than to the doctrines of capitalism that the institution is supposed to represent.
Bitcoin is the only true free market in the world.
This fundamental truth has been demonstrated again in the last few days, and it explains why Bitcoin price has been so volatile.
Bitcoin Is the Most Secure Decentralized Network in the World
In just over eleven years of its existence, the Bitcoin network has never been hacked. Bitcoin’s security has never been breached. This is quite incredible when you think about it, because hackers from all over the world have been trying to attack Bitcoin over and over again.
Nonetheless, Bitcoin has always stood firm. The piracy that has taken place in the Bitcoin world has only affected the weakest links: the trading platforms and the users.
Since its inception, Bitcoin has a 99.98% uptime. A figure that has nothing to envy to the uptimes of Web giants such as Google, Amazon or Facebook.
However, Bitcoin works securely only thanks to the shared computing power of its users. These people believe so much in Bitcoin and its future that they are always increasing the computing power they make available to the network.
At the beginning of the year 2020, Bitcoin’s Hash Rate has reached an all-time record above 130 TH/s.
The fall in Bitcoin price, and the general panic that has set in, has caused the Hash Rate to drop, but the network still has a Hash Rate close to 100 TH/s.
Bitcoin is still the most secure decentralized network at the world in the midst of the crisis.
Finally, you will notice that the situation in Bitcoin world has improved enormously since the end of 2017. While the network had been slowed down due to the huge increase in transaction volumes in the end of 2017, this time, in the middle of the storm, the Bitcoin network was able to absorb a big peak in transactions without any slowdown.
Bitcoin continues to grow as the current episode shows.
Bitcoin Still Belongs to Everyone
The high volatility in Bitcoin price over the past week is there to remind us that Bitcoin still belongs to everyone. Everyone has been free to sell their Bitcoin as they wanted.
When Bitcoin lost 50% of its value in a few hours, trading continued.
At the same time, Wall Street halts trading for 15 minutes as soon as the market drops more than 7%. This circuit-breaker has been applied several times since the liquidity crisis took hold in liquid markets.
This shows you that Wall Street is not a true free market. It belongs to a few all-powerful people who seek to protect their interests at all costs.
To do so, all means are good. As soon as the market doesn’t follow and starts to fall, Wall Street calls on the Federal Reserve to continue to artificially support the current system.
The Federal Reserve is using monetary stimulus so much that the effects are less and less noticeable.
The Federal Reserve’s emergency 100 basis point interest rate cut of March 15, 2020, accompanied by a quantitative easing program and a lowering to zero of the reserve requirement rate for banks, even seems to have been rejected by Wall Street.
Once again, Bitcoin is standing out from the current system by remaining strong on its fundamentals.
Bitcoin price lost more than 50% on March 12, 2020 at the height of the liquidity crisis we are going through. Many people lost faith in Bitcoin, and preferred to capitulate. These people were clearly not Bitcoiners who will be able to fully benefit from the Bitcoin revolution in the future.
True Bitcoiners always reveal themselves at the height of a strong bear market. This is the case again today. True Bitcoiners rely on Bitcoin’s fundamentals, which remain excellent, to keep an unshakeable faith in its revolution.
While Bitcoin price has indeed changed over the last few days, its fundamentals have not changed, which implies why the current price of Bitcoin should be seen as a unique opportunity in my opinion.