The Bitcoin Bubble: Will the Price Stabilize Above 60,000?
Let's be clear on this fact: the concept of stability is foreign to the world of Bitcoin. Any intelligent person would agree with this. People celebrate this digital token not because of its stability but because of its seemingly ever-rising value.
The Rhetoric Behind Bitcoin's Rise
The rise of Bitcoin is a story of central bank money printing and speculative trading. With US central banks printing money and distributing it to the public, individuals and investors alike are busy speculating on these assets. But this won't last forever.
A Fundamental Shift is On the Horizon
As trust fades in the idea of freely provided money, we will witness the epic collapse of these speculative bubbles. The intrinsic value of Bitcoin will only stabilize if every investor continues to hold their positions. However, history suggests that this is highly unlikely, as everyone is capitalizing on short-term profits. No sane investor would hold Bitcoin for a decade, as they would simply be left holding a potentially worthless asset.
Bitcoin: A Speculative Bet
At its core, Bitcoin is merely a digital token without any practical use or business value. It does not generate dividends, bonuses, or any other benefits for its holders. The rise in Bitcoin's value is based on a simple supply and demand model. It's a casino-like betting game where those who bet the highest win. The fuel for this betting comes from speculative traders and investors, financially supported by the Federal Reserve.
The Coming Correction: When Printing Stops
When the central banks curb their printing and stop giving out free money, the implications for Bitcoin traders and holders will be severe. If the Federal Reserve believes they can endlessly print their way out of recessions, they will be in for a rude awakening. At this juncture, the Federal Reserve may be forced to take a back seat, allowing the economic forces to play out.
!The Current Economic Climate
Today, people believe that the Federal Reserve will address the looming inflation crisis. However, I am pessimistic. The recent trends in the commodities market, such as the Dow continuing its ascend towards 35000 and the Nasdaq breaking through 15000, indicate that we are living in a world where speculative bubbles dominate.
Coronavirus and Economic Impact
With the escalating coronavirus cases in Maharashtra and across India, PM Modi has called meetings with CMs to address the surge. However, the ironic twist is that stringent lockdowns, which should normally lead to economic downturns, are actually boosting stock markets. This is because lockdowns provide more stimulus and thus more speculative power to platforms like Robinhood.
The result is a blinded market, where speculative gains overshadow economic realities. As we move into the second year of this economic uncertainty, any discussions of lockdowns or international flight bans are largely irrelevant to the market's optimism. The current economic environment is dominated by the belief in speculative bubbles, like Bitcoin and Tesla.
Conclusion
As we move forward, the world of economics is increasingly driven by short-term speculation rather than long-term reasoning. It is a shame that the formal economy and sound economic practices are being overshadowed by speculative bubbles.