Bitcoin is the leader of the pack in the crypto space. It has recovered from the disastrous crash of 2018 and is heading back towards the price it reached in December 2017. So what does the future hold for bitcoin?
Amid global economic contraction, Bitcoin appears to be gaining momentum against struggling fiat currencies.
Declines in bond yields and the continued issuance of fiat currencies make Bitcoin a more attractive asset. The value of bonds with a negative yield reached $17.05 trillion, breaking the record of 2019, according to the Bloomberg Barclays Global Aggregate index. Over the last 8 months, the index value has more than doubled, giving a new momentum to Bitcoin.
Dwindling opportunities to earn income on bonds are encouraging investors, including institutional investors, to shift to inflation-resistant assets such as Bitcoin. In 2020, several public companies, such as MicroStrategy and Square, have invested hundreds of millions of dollars in the first cryptocurrency.
John Ng Pangilinan, Managing Partner at Signum Capital, said that he is seeing an increase in the number of investors who want to generate income from borrowing bitcoins. According to DeFi Rate, bitcoin lending offers higher interest rates than government bond yields — up to 6%.
In October 31, the price of Bitcoin updated the two-year maximum of $14 100. Despite being the most gold-backed fiat currency in the global market, the Russian ruble now has a lower monetary base than Bitcoin. This is not the first time that the BTC and the ruble are moving in different directions — Bitcoin is becoming more expensive and the Russian currency is falling.
Since the beginning of the year, BTC has risen by almost 140% against the ruble and its price exceeds 1 million roubles. This happened against the backdrop of the weakening of the Russian currency against the US dollar — by almost a third in the last 10 months. Dmitry Peskov, the president’s spokesman, explained that at the macro level the situation remains stable — Russia is reducing its dependence on imports, so the change in the exchange rate has less and less impact on prices.
The rouble is falling due to falling oil prices, the second wave of COVID-19, uncertainty about the U.S. presidential election, the lack of progress on fiscal stimulus for the U.S. economy and the sale of risk assets around the world, which includes Russian ones. However, the same factors contribute to the strengthening of Bitcoin, which is showing signs of a protective asset in 2020.
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