July 2020

Is Bitcoin a suitable instrument to get over the crisis?

Dubai, United Arab Emirates, (AETOSWire): Bitcoin went through its third ‘halving’ last month without much public attention. Bitcoin ‘halving’, occurring every four years, only took place twice in the past.

International Monetary Fund forecasts global economy to decline by 3%. Country’s economic forecasts predict the U.K. (BoE) to drop far below 25%, Germany in almost 18%, and the U.S. to decline by 15% in the worst case scenario. These predictions could lead to estimations that Bitcoin could serve as a suitable instrument to ensure price movements of traditional currencies, and that is supported by lower Bitcoin supply.

First transaction on BTC block chain happened on the 3rd of January 2009, when Nakamoto generated 50 bitcoins. In the white paper, Nakamoto specified that after every 210,000 blocks the reward for miners will half. First halving took place on 28th November 2012, when the reward dropped to 25 from previous 50 bitcoin. Second halving happened on 9th July 2016 and the reward lowered from 25 to 12.5 bitcoin. And the third, most recent halving on 11th May 2020 means that bitcoin miners receive only 6.25 bitcoins. Even though there’s no clear explanation to why bitcoin halving happens, most crypto experts agree on similar explanation – it concerns yields.

From the perspective of currency as such, speculations on bull market don’t affect the situation much, as can be seen in the above mentioned effect of supply reduction. However, there’s evident bitcoin market tightening and dynamics of price development in the period of mining reward decline, which lowers supply in the market.

In spite of the optimism by the crypto community regarding Bitcoin’s “anti-crisis” character, Gulf Brokers warns against strong risks that imply all the crypto currencies, including Bitcoin. Basically, there are two major of them: one is an arrival of even stronger crypto which would redirect the demand from Bitcoin and, thus, cause its price fall. The other one that we can already see, represented by governments and central banks. As the power of Bitcoin grows, there are more tendencies to regulate the crypto currency. No matter what kind of regulation to be deployed, it is almost sure that it will go against the value of Bitcoin.

*Source: AETOSWire

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