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Bitcoin May Assist In Current Economic Slowdown in the Long-Term
The crypto market has been often compared to the traditional market and Bitcoin’s (BTC) volatility has often been a problem for the investors in equity or other asset class. Despite this volatility, Bitcoin and crypto have emerged as an asset class which attracted many seasoned and institutional investors in the past 12 to 18 months. However, this could not be possible without the uncertainty reflected in the traditional market. Now, as we are in the economic slowdown, can Bitcoin help?
Kevin Kelly of Delphi Digital said that the macro-economic background has never been more beneficial to Bitcoin. Kelly, who appeared in Block Crunch’s latest episode, said that ups and downs of the traditional market has often influenced even Bitcoin’s market along with other cryptocurrencies. The most recent example was the panic-driven fall seen in mid-March. As the traditional market recovered, crypto market did the same.
Bitcoin’s digital gold narrative has played well with the investors and has been considered as a safe haven. Even in the recent crash, despite the fall and recovery occurring across all asset classes, Bitcoin acted more like gold. Despite being around for a bit more than 10 years, BTC has gained the reputation of digital gold and has been considered as a safe haven asset. Thanks to its characteristics, Kelly stated, BTC can be regarded as a non-sovereign, digitally native, hard cap supply, which falls into the category of a safe haven asset, in the long-term.
However, there has been a correlation between Bitcoin and other asset classes, but in time, the correlation may fade with risk-assets. The money which has been injected into the economic system will finally mount inflation and people might turn to Bitcoin due to its digital gold narrative. The fading correlation will just not be visible with Bitcoin, but with altcoins as well.
Since Bitcoin is strongly correlated with Ethereum (ETH), the attention of the investors may also be diverted to the second-largest crypto and the various projects such as decentralized finance and DApps in the crypto industry. Decentralized finance (DeFi) has been working tirelessly to develop a parallel financial system, which will be a good alternative for traders and investors in the long-term, as the current economic system has to solve grave challenges. Kelly noted:
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