Bitcoin Gets Experts’ Endorsement as Alternative to Quantitative Easing
Bitcoin has always battled with questions and criticisms posed by naysayers and antagonists.
Questions like, “will Bitcoin fit perfectly into quantitative tightening policy?” “What chances does Bitcoin have in the face of global adoption of QT policy being adopted by big economies globally?” “Can bitcoin upend fiat currencies?” “What incentives will attract more investors to virtual currencies?” are rather commonplace.
All of them, in one form or the other, point to just one fundamental question “will cryptocurrencies ever outlive naysayers’ pessimism?”
These questions are not surprising, considering that bitcoin is a very disruptive technology. The crypto market cap is now a fraction of what it used to be, with volatility constituting a great threat to the potential mass adoption of these tokens. However, it doesn’t appear to be just a crypto thing. Financial experts are saying we may be headed for another round of global recession in the near future.
This is probably why cryptocurrencies still remain quite unsuitable and seemingly unappealing for large scale investments. In fact, chances are that investors could lose money and investment in their millions if they don’t play this right.
The prevailing situation in the market –massive volatility and so on- may discourage many institutional investors, including retirement and pension fund managers with access to huge capital, as well as big brands and entities, from investing in these digital assets.
Yet, the crypto industry needs these “money bags” to boost its image and achieve its dream of being adopted massively across the globe. Investments from these industries will give convince even more retail investors to get into the market.
But, these investment funds need to guarantee some level of long term stability and returns on investments for their customers before even attempting to invest. This is probably why these companies are wary of investing in cryptos. As far as they’re concerned, cryptocurrencies are probably suitable for speculative short term gambling, as against long term investment assets.
While it’s true that bitcoin and other cryptocurrencies have grown to become highly sought after assets, central banks and countries have continued to tighten monetary policies that make mass adoption of cryptocurrency a distant dream.
There is also no answer to the question of Quantitative easing (QE), a policy tool used by central banks to create money that can be used to buy government debt. With tool like that, interest rates are lowered while capital becomes available for reinvestment.
While that sounds nice, QE however, is increasingly growing controversial and uncertain with critics saying it is just a backhanded way by central banks to print more money which in turn leads to devaluation and inflation.
The question then becomes which option is more viable if QE isn’t really advisable?
Instead of the policy of pumping money into the economy which QE focuses on, central banks in major global economies have sought to adopt Quantitative Tightening (QT) system, a monetary policy adopted to reduce the amount of money that goes into the treasury.
In a crypto conference held in Bloomberg’s London offices, panelists from across various investment funds admitted that quantitative easing is not the way to go and central banks have to adopt find a way of reducing the inflow of money.
The speakers lent their support to the prospect of QT, pointing in the direction of Bitcoin as an attractive alternative in terms of long-term investment. If fiat currencies are unstable and losing confidence in value, there is need for investment diversification in crypto, and Bitcoin provides the perfect answer.
Switching to Bitcoin from fiat could be a huge challenge because large parts of the world have come to rely on a strong and stable currency. So, it is still a long way to go as few people will take very seriously the idea that Bitcoin will become an everyday means of exchange as against what they use to use. Besides, Bitcoin has to up its game in terms of reducing volatility.
Bitcoin, however, has its merit, especially when looking at it as currency that does not largely rely on government or central bank policy to function optimally. There is also the edge it has over fiat currency and that is in the area of being a store of value with a determined price in the open market.