Tesla CEO Elon Musk said Bitcoin was “on the verge of getting broad acceptance” from the traditional finance world. The price of the cryptocurrency rose, while Bitcoin stocks were mixed.
Musk, who briefly overtook Amazon CEO Jeff Bezos last month as the world’s richest person, made the remarks in a conversation on the chat app Clubhouse, offering his latest signal of support for the digital currency.
“I do at this point think bitcoin is a good thing, and I am a supporter of bitcoin,” he said, according to various media outlets.
On Friday, Musk added the hashtag Bitcoin to the bio on his Twitter page. That continued a string of Bitcoin price swings, which saw an all-time high of $41,940 then a plunge below $30,000 soon after that.
Bitcoin Price, Bitcoin Stocks
Bitcoin rose 2.8% to $33,776. Among Bitcoin stocks, Grayscale Bitcoin Trust (GBTC), which tracks Bitcoin’s movement, fell 2.1% in the stock market today.
Among other Bitcoin plays, PayPal (PYPL) added 3.2%. Square (SQ) rose 2.8%. At the latest Bitcoin price, it held a market value of more than $628 billion, according to CoinMarketCap.
The cryptocurrency rallied last year on more mainstream adoption. Economic stimulus and central bank intervention last year also prompted a stampede into Bitcoin purchases.
PayPal has allowed users to buy and sell cryptocurrency from their accounts. Square has allowed users of its Cash App to make automatic recurring purchases of Bitcoin, and has bought $50 million of the digital asset. Massachusetts Mutual Life Insurance purchased $100 million in Bitcoin for its general investment fund.
American Express Ventures has invested in a cryptocurrency trading platform. Visa (V) will offer a credit card that lets users earn money back in the form of Bitcoin. JPMorgan (JPM) has put its own digital currency to commercial use.
It’s been a volatile few months for bitcoin. The cryptocurrency briefly shot 20% higher after billionaire Tesla founder Elon Musk changed his Twitter bio to ”#bitcoin.”
Though it quickly gave up those gains, there are parallels between bitcoin’s swift move higher and the GameStop stock mania, which continues to dominate the global news cycle.
The battle of hedge-fund short sellers versus retail traders who are coordinating on social media to drive the price higher could be a sign of what’s to come for the world’s biggest cryptocurrency.
Data from crypto news and analysis company The Block shows that hedge funds are short bitcoin by more than $1 billion. That term “shorting” means that traders and hedge funds are betting that the price of bitcoin will go down. Those short positions ramped up starting in October 2020, just as bitcoin’s latest rally began to take hold.
Meanwhile, individual investors are still buying into bitcoin, among other cryptocurrencies, as they bet that the price will go up. Sound familiar? Retail brokerages including Robinhood have extended trading restrictions on stocks such as GameStop, and as of Friday, the trading app is also limiting trading in cryptocurrencies.
Unlike GameStop, a brick-and-mortar mall business that was closing stores even before the pandemic led to widespread shutdowns, analysts say the fundamentals underlying bitcoin tell a more promising story.
Analysts at JPMorgan think the price of bitcoin could rally as high as $146,000, and the global head of CitiFXTechnicals says the charts signal that bitcoin could reach $318,000 by December.
Part of what’s different about bitcoin’s rally in 2020 versus its last run higher, in 2017, is that institutional investors are now adopting bitcoin, lending it newfound legitimacy and helping to erase the reputational risk of investing in the cryptocurrency.
“We’ve seen the majority of folks like insurance firms, asset managers, hedge funds and corporate balance sheets come into the market in 2020,” said Michael Bucella, general partner at crypto firm BlockTower Capital.
The surge in interest from mainstream financial players hasn’t just reformed bitcoin’s image, it’s also fomented a supply shortage.
Bitcoin’s supply crisis
“There is a large and emerging group of institutions that have an enormous capital base that are reallocating to this space,” Bucella said. “And if you think about the supply-demand model of a commodity, the supply curve is declining over time to effectively zero, and the demand is increasing exponentially.”
There will only ever be 21 million bitcoins in existence, because, like other cryptocurrencies, it was built around the principle of a finite supply. The total number of mined bitcoin is at roughly 18.6 million, so it’s nearing its maximum threshold. And that interest from institutional investors doesn’t appear to be slowing down.
“There’s a lot of demand, and there’s not enough supply of bitcoin for every financial institution to have their own reserve to serve their clients,” said McKenzie Slaughter, a member of the Black Women Blockchain Council.
Bitcoin vs. GameStop
The GameStop saga has been driven by a large group of Reddit day traders, at least some of whom are motivated by wanting to stick it to Wall Street. They coordinated online to pile into GameStop in order to drive the price of the stock higher, with the specific purpose of causing hedge funds to lose money.
That same underlying anger and frustration over how institutional investors make profits has also played a role in bitcoin’s rise. A big part of the cryptocurrency’s intrinsic value is derived from the fact that it isn’t tethered to any one government nor is it pegged to other currencies.
Investing in an independent cryptocurrency such as bitcoin, therefore, means you are putting your money toward a technology and a currency that could one day replace the modern financial system. This is certainly not lost on retail traders looking for the ultimate way to cut institutional investors out of the equation.
Cars, furniture, toys and an at-home coronavirus test are among the weird goods and services people are buying with bitcoin.
In the past year, the value of Bitcoin has risen from less than $10,000 to more than $50,000. Square and IBM are using blockchain, the technology behind the currency, to design and improve digital payments methods.
But what can you actually buy with Bitcoin?
Turns out, a lot. But it’s not always so easy.
“Bitcoin is just not the most efficient currency yet,” said Henry Elder, the head of wealth management at Wave Financial, a digital assets firm in Los Angeles.
For example, one can purchase goods from Amazon with Bitcoin, using a third party service called Purse. The way Purse is supposed to work is this: A customer selects the items he or she wants to buy on Amazon, then copies the URLs and returns to Purse, which processes the transaction, using gift cards it’s acquired from people who want cryptocurrency.
Purse guarantees its customers a minimum discount of five percent off Amazon’s list prices and adds the option of negotiating to receive up to fifteen percent off. I tried getting a $42.99 pack of 20 black KN95 masks with money I put in a Bitcoin wallet, but when it came time to click “order,” the total price — with fees — was $47.47, and that was including the eight percent discount I proposed paying.
The whole thing felt a lot like ordering from Uber Eats, except that there wasn’t even a bag of cold food at the end. It definitely wasn’t like buying directly through Amazon with one click.
In 2014, Overstock became one of the first big e-sellers to accept direct Bitcoin payments. It subsequently went on to develop a number of businesses related to blockchain.
In an interview last week, the company’s chief executive, Jonathan Johnson, made plain that there isn’t an obvious overlap between the selling of closeout sofas and the rethinking of the world’s major currencies. Bitcoin isn’t a very big source of Overstock’s revenue.
During the first three quarters of 2020, the site had revenue of almost $2 billion, according to its earnings reports. An average of $30,000 to $50,000 a week came from cryptocurrency, said Mr. Johnson. “Our demographic skews hard towards women and Bitcoin purchasers tend to be men,” he said. “It’s a different customer segment.”
Mostly, it would seem, Bitcoin became a payment option because its ethos lined up with the libertarian leanings of both Mr. Johnson and Patrick Byrne, Overstock’s founder.
Records are maintained through a publicly available, digital ledger, known as a blockchain, managed by a volunteer army over numerous servers. It readjusts in real time as transactions take place between different holders of Bitcoin.
It’s been a few years since it crashed back in 2018 — but now Bitcoin is setting new heights.
Bitcoin’s value is at a three-year high. This month, for the first time since December 2017, the notoriously volatile cryptocurrency’s price officially surpassed $30,000, boosting its market cap to an all-time record of $600 billion. The digital token’s highest ever price was recorded in December 2017, at $19,783—but according to Deutsche Bank analysts, there have only been five other days in history when its price has closed above $17,000. Now many analysts are projecting that Bitcoin’s price could top $50,000, and at least one major U.S. bank is claiming the bull run could reach as high as $318,000 by the end of 2021.
For anyone who doesn’t usually pay attention to financial trends and decentralized peer-to-peer cryptocurrencies, this might all seem a bit sudden. For those who jumped off the Bitcoin bandwagon following the crash of early 2018, it’s likely to be galling. And for those who held their nerve, stuck it out through hell and high water and three-year lows and are now riding the wave back to the top, it must be incredibly satisfying.
In any case, it’s fair to say there are some questions around the Bitcoin boom. Here’s what you need to know.
Why is this happening? There are two main drivers for Bitcoin’s recent surge.One is an announcement made by PayPal in October, when the platform revealed that it would allow its users to to buy, sell, and hold the token and engage in Bitcoin transactions.
“The fact that a platform of PayPal’s stature is doing this gives Bitcoin a massive credibility and legitimacy boost,” says Professor Tan, “and even more so given that PayPal has a strong reputation for protecting its users and being comparatively prudent.”
The second factor is what’s known as “network effects”: that is, the idea that a cryptocurrency’s value increases as more people buy, own and use it. Like any stock, the more people on the bandwagon the more valuable that bandwagon is. And according to Professor Tan, Bitcoin’s recent surge could indicate that it’s starting to be taken seriously again.
“Bitcoin has been around for a while (12 years), and for some time, its detractors have been saying that it is nothing but a bubble—because it is not backed by anything of value, they expect that the currency would eventually crash,” he told VICE World News over email. “But it hasn’t, and its longevity could be contributing to the realization that maybe it could really be here to stay.”
Will the price keep rising? It’s obviously tempting to jump on board a burgeoning investment and get in while there’s still some money to be made. But when it comes to stocks, it’s often the case that by the time you’re hearing about in a bar, on the street or in the back of a taxi, it’s already too late. Bitcoin’s recent surge has attracted a lot of attention, particularly given the cryptocurrency’s shaky reputation. So has the ship sailed?
According to Dr Priya Dev, a lecturer and researcher at Australian National University’s Research School of Finance, Actuarial Studies & Statistics: not necessarily. “Bitcoin is a digital form of gold which means there is a finite supply of it—and we know there is a finite supply because we can cryptographically verify ownership,” Dr Dev explained to VICE World News over email. “Bitcoin is approaching its 2017 all-time high because demand for this cryptocurrency is outweighing supply … more people know about it and a lot of innovation is occurring that utilises Bitcoin and cryptocurrencies.
“Because Bitcoin’s supply is fixed, its inflation—the number of new Bitcoins that enter the market—is falling, so if demand stays constant, its price will rise.” In other words: the asset is only as valuable as it is rare, and it’s only as rare as it is popular. If Bitcoin continues to be widely coveted, especially as the number of available coins diminishes, then the price will continue to rise. But once people start offloading, a crash is sure to follow.
People continue to turn to Bitcoin and other cryptocurrencies to boost their profits even amid a pandemic.
As the COVID-19 pandemic pushed the US economy into recession and deepening unemployment, more and more Americans see the benefits of trading and mining Bitcoin as an alternative source of income.
Many Americans, particularly young people, are interested in cryptocurrencies. Wael al-Nahhas, an economist and financial advisor to several investment institutions, said: “Many started investing in small amounts despite the increase in the value of the bitcoin. They started mining Satoshi, which is 100 millionth of a bitcoin, and on a daily basis they are making profits of 4% to 5% from the difference between buying rates during the timing of demand decline and selling rates at the time of peak demand, besides some quarterly or yearly profits from unexpected hikes in bitcoin rates.”
Unemployment in the US jumped from 3.8% during the first quarter of 2020 to 13% during the second quarter, meaning more than 14 million Americans have lost their jobs, recent numbers from the Pew Research Center said.
Bitcoin trading then looks very attractive. Muhammad Abd el-Baseer, a Bitcoin miner, said other factors also made it easier for people to turn towards Bitcoin. He said the move to work from home, reducing working hours, and new curfews encouraged many to invest in Bitcoin in their spare time.
The largest Bitcoin ownership survey reveals 6.2% of Americans own Bitcoin, while 7.3% are planning to buy some. However, this number could be higher as people may teach their friends and family how to invest in cryptocurrencies.
But while more Americans become interested in mining and trading cryptocurrencies, many are concerned that people could be targeted and accused of fraud without proper legislation. A law clarifying what activities can be considered legal or not around cryptocurrencies could come soon, according to experts.
Blockchains—what are they, what do they do and most importantly, how might they help the world.
Have you heard of blockchain technology? Basically, it lets people who don’t know or trust each other build a dependable ledger, a time-stamped record of secure online transactions. Blockchains accurately record each individual transaction on multiple computers in a single “block” of data, which can’t be altered retroactively. Potentially used for a wide variety of applications—financial transactions, the transfer of real property, even voting—its decentralized digital ledger ensures the ongoing integrity of any chain of transactions. Cryptocurrencies like Bitcoin and others use blockchain technology to record and verify all of their transactions, and have become more popular around the world as a medium of exchange that needs no intermediary like a bank or a broker. Every participant in a blockchain can authenticate, verify and audit every previous transaction, openly and inexpensively. What banks and financial institutions used to do—sometimes well, sometimes not so well and sometimes even fraudulently—crowdsourced wisdom and honesty could conceivably soon replace. Since just about everyone in any series of transactions wants them to be truthful, aboveboard and transparent, you could describe blockchains as an open-source, collaborative way of making sure everyone deals with everyone else honestly. The technology establishes universal trustworthiness, all guaranteed by the sequential nature and open design of the process itself. Blockchain technology has remarkable potential—fully developed and utilized, it could create entirely new foundations for global financial, economic and social systems. Can you see how blockchains might help change the world?
The unity of the human race, implies the establishment of a world commonwealth in which all nations, races, creeds and classes are closely and permanently united, and in which the autonomy of its state members and the personal freedom and initiative of the individuals that compose them are definitely and completely safeguarded …. A mechanism of world inter-communication will be devised, embracing the whole planet, freed from national hindrances and restrictions, and functioning with marvelous swiftness and perfect regularity. A world metropolis will act as the nerve center of a world civilization, the focus towards which the unifying forces of life will converge and from which its energizing influences will radiate. A world language will either be invented or chosen from among the existing languages and will be taught in the schools of all the federated nations as an auxiliary to their mother tongue. A world script, a world literature, a uniform and universal system of currency, of weights and measures, will simplify and facilitate intercourse and understanding among the nations and races of mankind. … The economic resources of the world will be organized, its sources of raw materials will be tapped and fully utilized, its markets will be coordinated and developed, and the distribution of its products will be equitably regulated.
Part of that vision of the future of our planet has already come true—that “mechanism of world inter-communication” exists now, although we still have a way to go before it operates with perfect regularity and is “freed from national hindrances and restrictions.” Today, though, people all over the globe are busy working on one of the most ambitious and futuristic descriptions of the coming age — “a uniform and universal system of currency” which “will simplify and facilitate intercourse and understanding among the nations and races of mankind.” That system, which could be based around the blockchain concept, would help democratize the global economy; attack the world’s persistent social and economic inequalities; root out hidden criminal wealth; prevent fraud, tax evasion and money laundering; and even revolutionize the way the world deals with poverty and hunger.
For example: the UN’s World Food Programme (WFP) has recently begun using blockchain technology to securely and transparently distribute immediate cash assistance to hungry people in remote and difficult-to-access parts of the world. The WFP’s pilot blockchain program, called Building Blocks, is demonstrating how blockchain can empower humanitarian organizations to quickly and safely send monetary aid to undeveloped regions and nations. This means that the WFP has fundamentally changed its approach to feeding the hungry—instead of just donating and delivering food, with its many expensive logistical complexities, the WFP distributes cash assistance securely to the people who need it most.
That direct distribution of funds used to be impossible, because of the corruption inherent in various governments, militaries, banking systems and political factions in places where conflict, famine or natural disasters occurred. Often, when donations of relief supplies like food or medicine arrived in those places, they would be confiscated or stolen and then sold on the open market, never reaching their intended recipients.
The transparency and security of blockchain technology eliminates the fear of potential misappropriation of funding or tampering with transactions. For instance vulnerable families in around the world can receive food and cash assistance immediately. Cryptocurrency can authenticate and record transactions with a smartphone, which tracks and verifies the fact that families received their emergency funds, and could even confirm that the funds were spent for food. With this example in mind, and with blockchain’s potential to revolutionize humanitarian assistance, NGOs could begin widely utilizing this promising new technology as a way of disseminating cash assistance—and also initiate the next major step toward fulfilling the promise of a universal and uniform system of currency and its equitable distribution around the world.
Bitcoin has become extremely popular in recent times. According to a recent survey conducted about the use of cryptocurrency, it was found that more than 70 % of the survey participants used cryptocurrency to purchase clothes, food, and pay rent over the past twelve months.
Cryptocurrency Holders Actually Spend the Currency
Unlike what you might have been misled into believing, Bitcoin is not only hoarded by cryptocurrency enthusiasts but is also used for making purchases. The Bitcoin Market Journal and Block Card had partnered to survey more than 35,000 cryptocurrency investors to find out if they use the cryptocurrency for making payments. The survey asked if digital assets were spent over the past twelve months, what they plan to do the next year, and what products were bought using cryptocurrency. The results were rather conclusive. Since the spending categories tend to be versatile, it shows that cryptocurrency can be used for making all types of payments.
Cryptocurrency Used for All Types of Payments
The survey showed that close to 11 percent payments were made for food, 12.6 percent for entertainment, 8.4 percent for clothing, and 8.4 percent for education. Moreover, it is important to note that over 5 percent used Bitcoin for paying rent. Thus, it is clear that ownership of digital assets has been on the rise. It started from users paying to top up their credit to spending Bitcoin to purchase items online. Today, cryptocurrency is spent by people on a wide variety of products and services.
How Much Are People Even Spending?
The most important question that needs to be answered is how much money people are spending through cryptocurrency. Although most of the participants had spent digital assets over the last 12 months, the amount they have spent suggest that there is no exclusive cryptocurrency or specific item that people spend money on.
Around 59 percent of the respondents had stated that they spent anywhere between $99 and $10,000 over the past 12 months. Only 12.22 percent of the respondents bought goods or services over $10,000. It is important to note that most people (76.5 percent) have expressed the willingness to continue spending through digital assets. On the other hand, 14 percent of the respondents prefer holding cryptocurrency. The remaining 9.5 percent remain uncertain. They are concerned about insufficient stores accepting cryptocurrency as a form of payment.
Cryptocurrency Is the New Money
Now, even though Bitcoin-thought leaders tell others to hold the cryptocurrency, data reveals that people are using digital currency as actual money. This clearly shows that cryptocurrency is the new currency. Besides, cash has been on the decline ever since the emergence of the Covid-19 pandemic. People are finally realizing that it is a lot easier to use Bitcoin instead of any other form of payment.
This survey and other market research data show that Bitcoin will become the new normal. Thus, different cryptocurrencies are battling it out for major status. The future seems bright for Bitcoin. If you are thinking of acquiring Bitcoin, you should have nothing to worry about.
Covid-19 has taken a toll on the US economy. There has been a reduction in access to cash that has resulted in an increase in financial exclusion in society. For generations cash has played a huge role in society. It has been the primary means of payment for quite some time now. However, over the past few years, cash has been in decline. The decline has been further fueled by the Covid-19 pandemic. There are certain implications of this decline as the production of cash impacts distribution of cash to businesses and citizens alike.
Notes and Coins Continue To Be Used
Most adults in the US still make use of cash some of the time and there are certain sections of society which are largely reliant on cash for meeting their everyday requirements. It was further reported that more than $100 billion are spent every year in shops using coins and notes. It represents $1,500 for each child, woman, and man.
Banknotes Experience an Increase in Demand
Even though the use of cash has fallen when it comes to daily transactions, there has been an increase in demand for banknotes continuously. However, central banks do not possess much reliable information which can be used for quantifying how much is held, why it is happening, and where.
Research has revealed that an increasing number of notes are used as a store of value of major currencies. The demand for cash has seen an increase due to potential factors like interest rates and low inflation. Confidence has increased in the real value of cash after the 2008 financial crisis, which reduced confidence in banks.
Cost of Running the Existing Cash Infrastructure
The cash system is complex and large. When it comes to running the cash system, it can be costly for both businesses and taxpayers. However, as there has been a continuous reduction in the use of cash, it is putting significant pressure on the cash system.
The majority of costs associated with cash production and distribution tend to be fixed. Commercial operators continue to warn about impending pressure on business models that rely on higher cash volumes. The risk of financial exclusion is on the rise due to the reduction in the ability of people having access to cash, especially since the costs of using cash have increased.
Migration to Digital Cash and Bitcoin
Central banks are trying to understand which consumers make use of cash the most and why they even need it in the first place. There has been an increase in migration to digital cash and Bitcoin in recent times. Bitcoin offers a great opportunity to the masses. It can be used for just about everything. As governments relax legislation regarding Bitcoin, it is expected to be the future.
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