Bitcoin is an insurance policy against the policies of governments and central banks

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Fidelity, one of the largest asset managers in the world that manages over $ 3 trillion for its clients, released a comprehensive report at the end of July examining the thesis of investing in Bitcoin as a potential means of maintaining value – in the short and long term.

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“Bitcoin is a lot of things for a lot of people,” the report begins. “The reason people choose to own Bitcoin depends on their circumstances and their perception of what Bitcoin is today, and what it could become in the future.” That there are various opinions that deal with the question of whether Bitcoin is a means of value preservation (Store of Value), a means of payment (Medium of Exchange), both and – or none of them. The report deals with the question of means of preservation of value, and more reports Digital in general, and Bitcoin in particular.

Bitcoin

The conclusions of the study are that Bitcoin contains the characteristics needed to be used as a means of maintaining value in the future, but that it is not yet perceived as such, mainly due to the high volatility of the exchange rate. One of the most significant features of a measure of value retention is rarity, as it is a necessary characteristic in order to protect the measure from reducing its real value in the long run.

“One of the most refreshing innovations of Bitcoin is the undeniable digital rarity.” The report says. Remind you, Bitcoin is limited by the rules of the protocol, which are transparent and known to all, to a maximum supply of 21 million coins. About 88% of the coins are already circulating among the currency users, while the rest will be gradually known to the world over the next 120 years. The protocol is enforced by a distributed network of computers and users who are financially motivated to enforce them, in a mechanism called “proof of work” – a key part of which is also known as bitcoin mining.

A certificate of insurance against the unknown consequences of unprecedented policies

In order to deal with the great damage to the economy, which existed even before the Corona virus but intensified dozens of times in its wake, governments and central banks all over the world are implementing huge incentive packages. This policy, they claim, should help reduce the impact of the economic crisis, encourage economic activity in the economy and satisfy the various financial markets.

“Even before the world enters the current health and economic crisis, investors have envisioned the use of more direct measures to increase liquidity by central banks and governments to encourage inflation that is stubbornly low for a number of reasons,” the report said, referring to broad decision-makers’ policies. In an attempt to combat the deflationary forces of gravity that are trying to bring prices of products and services down. Among the diplomatic gravitational pulls are technological development, which accelerates processes of efficiency and therefore lowers prices – and bankruptcies of households and businesses, which can lead to a major collapse.

Bitcoin Bitcoin Photo: Dan Kitwood

“External forces that are accelerating interest and investment in Bitcoin include unprecedented levels and exotic forms of monetary and fiscal policy in the world, with unknown consequences,” the report continues. ” May serve as a defense against the unknown consequences. ”

De-globalization and “capital transfer”

Beyond the policies of central banks and governments, there are two other processes that are mentioned in the report and are experiencing acceleration in their own right. One is de-globalization, moving away from the world. Globalization is a structural force that has historically kept products and services low. Businesses export their production or import cheaper components and materials.Globalization has been a key tool in the fight against inflationary pressures, but it has been slowing down since 2008, the year the last major economic crisis began.

Following the epidemic, the shutdown of aircraft engines and closure measures taken around the world, businesses and governments began to understand the significance of the supply chain’s dependence on globalization conditions, and “added momentum to at least further partial de-globalization” according to the report. In the news, mainly as part of the US-led trade wars against China, the eurozone and other countries in the world.

This means that the acceleration of the de-globalization process may push the prices of products and services upwards as a result of reducing dependence on global supply chains and increasing the demand for domestic production, which is often more expensive.

The second process mentioned is the process of great wealth transfer, “The great wealth transfer”. The report explains that a fortune of about $ 68 trillion that belongs to the older generation in the US is expected to pass over the next few years to the millennial generation. Millennials are more open to innovation, and are not among the proponents of the traditional banking system, according to surveys conducted by Fidelity. Therefore, Fidelity predicts that in the long run this will have a positive impact on Bitcoin as well.

Success is not guaranteed

“While the success of Bitcoin as a means of value preservation is not guaranteed,” the report concludes. “If a sustainable increase in demand for a test case is described as unsuccessful, the backbone described in the report should drive cumulative demand for an innovative asset with unique features.”

From Bitcoin to Dollar From Bitcoin to Dollar Photo: Shatterstock

The success of Bitcoin is indeed not guaranteed, as Bitcoin is still an experiment. It is an 11-year-old socio-technological-technological experiment, which in the meantime withstands a wide range of obstacles and attacks, and it does so not only in field conditions – but also in a very good way. There are quite a few risks that could adversely affect his future, but as time goes on, it is apparent that there will be an awakening among a larger public to its unique characteristics, in relation to the image attached to it in the traditional media. Fidelity’s report, which joins the Comprehensive Fund’s reportFencing ‘Tudor Investments’ in its conclusions, presents this in an excellent way.

The author is an expert in Bitcoin and digital currencies, the founder of the content site CryptoJungle, one of the founders of Blockchain B7 and director of marketing and public relations at MarketAcross. The writer owns Bitcoin.

This should not be construed as investment advice, recommendation or marketing. The information presented is for information only and is not a substitute for professional advice. Anyone who uses it, does so at his own risk and responsibility only.

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