January 2022 looked upon Bitcoin with less favour than it has on past New Years’ resolutions. The year ended with a bang! Bitcoin hit its all-time high of $69,000 and a Crypto overall market capitalisation of around $3 trillion in Nov 2021. Then the new year arises, and all New Year’s Resolutions disappear.
Crypto dropped to a value of $2 trillion in January 2022. Covid-19 brought uncertainty with its collection of new variants. Retail investors leaned towards buying the dip or cutting their losses.
Is It a Fair Game?
As in life, you “dust yourself off and try again”. Bitcoin recovered in April 2022 but sadly slammed down to a new low in June 2022, concluding in a 50% – 70% drop since its all-time high. The Crypto coin has been on a downward spiral ever since, fighting hard against ever-increasing inflation rates, the growing US dollar and the high-interest rates that join it.
Bitcoin could potentially be a good hedge against inflation, but at the moment, inflation is high, the US dollar is high, and stocks are low. Moreover, there is a considerable rise in the inflation of goods and a suffocating salary deflation.
Due to this cruel game of 2022, where will you put your money? Banks go through Quantitative Easing, which decreases the currency’s value. They do this to ‘secure’ their country’s finances to prevent another market crash. Crypto is risky, unstable, and manipulated. Who is the lesser of two evils?
A Change In Players
CBDCs (Central Bank Digital Currencies) are digital ‘tokens’ like cryptocurrencies, but a central bank issues them in this case. These currencies are linked with the value of that country’s flat currency. Many countries like Europe and Japan are developing CDBCs, and some have already implemented them.
The launch of CBDCs will likely impact Bitcoin’s relevance as an SoV (Store of Value). Matthew McDermott, Goldman Sachs’ global head of Digital Assets, said:
“Bitcoin is now considered an investable asset. It has its own idiosyncratic risk, partly because it’s still relatively new and going through the adaption phase.”
Let’s look at the possibility that while CBDCs may take over how we use Bitcoin to earn, save, stake, borrow and lend, Bitcoin may still lead this game as a tradable asset. Mary Callahan Erdoes, JPMorgan’s Director of Assets and Wealth Management, says that many of their clients have requested Crypto investments seeing them as an asset class.
This could mean that Bitcoin’s utility can then be limited to that of an investment instrument.
Is There Hope?
In an interview on Kitco news on 17 October, Guy Turner, Coin Bureau Co-Founder, said:
“Bitcoin will never go to 0. Bitcoin has a lot of challenges ahead of it, but the rabbit is out of the hat; it’s beyond the reach of governments.”
Deutsche Bank believes that Bitcoin will go over $110 000 in the next five years. So take responsibility for your finances; the ball is in your court.