In this issue
- Bitcoin rockets to new record prices
- Ethereum surges close to all-time highs
- XRP community ask US government to declare the stablecoin a currency
- China intensifies DCEP digital yuan tests as Russia, Turkey and Ukraine join CBDC race
From the Editor’s Desk
Volatility, thy name is bitcoin.
2021 kicked off with a bang for bitcoin, as prices soared to a new record high of US$34,792.47 on a Monday morning in Asia (Sunday afternoon for those of you in the U.S.). And the news coverage intensified. Business news outlets couldn’t ignore the story, and yours truly was among those tapped to share some views on the record rise of bitcoin on live network news programming. I get it. I do get it. In my former life as a business global anchor, you follow the money story.
But bitcoin isn’t just a money story, it’s so much more than that (which is why I founded Forkast.News). It’s a story that transcends prices, and speaks to a greater narrative that includes a need for an alternative monetary system that may or may not be decoupled from the legacy financial system. What’s driving bitcoin prices north at the moment is the sentiment that it can provide an alternative to fiat currency, and thus is a hedge against the current backdrop of negative yields and infinite stimulus to fight a sputtering, Covid-infected global economy. The irony is that it’s the demand from institutional investors that are driving bitcoin prices higher.
On the news program, I was asked if the markets would see a price correction. It’s a great question, but hard to answer because of the nuance of this new alternative asset class. Correction suggests fundamentals that are missing. But price movements in bitcoin that “correct” (as in drop) are more reflective of the psychological nature of the market. There may be profit-taking that triggers a sell off, only to be replaced by others who are new and just entering the market now; bullish on bitcoin’s anticipated growth this year — whether it’s another 300% increase like we saw in 2020 or not.
What is fundamentally clear (pun intended), is that there is currently more demand than supply. With hashrates on the rise once again to record highs (where the price of bitcoin makes it enormously profitable for miners), the race is on to release the last of the approximately 2.5 million of the 21 million bitcoin that will ever exist ever into the market. This finite product with growing demand that is hedging against the backdrop of unending stimulus and record low interest rates is the real fundamental that supports the price of bitcoin. So while we continue to see volatility swings, which is inherent to bitcoin price movements, one must look more broadly at the trajectory. The price dip recovered quickly, and no doubt we’ll see price dips again, but the floor is being set by those who hold bitcoin and don’t intend on trading it (estimated to be 78% of all bitcoins in existence) and the corresponding…