Bitcoin’s Velocity Slow Down May Signal Its Use AS Stable Reserve Currency

New analysis that were released this week signify that Bitcoin is being adopted as a ‘reserve currency’ considering its velocity has dropped by half in 2018. Compared to 2016 and 2017, Bitcoin transactions have dropped tremendously and it seems that most people want to use it for speculation rather than for carrying out transactions.

According to Nodar Janashia who is a developer and interviewer, Bitcoin processed about $58 billion worth of transactions which means that 1 Bitcoin changed hands almost 6.5 times in order to arrive at this figure. However, he clarified that this figure wasn’t 100% accurate considering the fact that only a portion of the total supply of Bitcoin was in circulation; thus had zero velocity.

Was Investor Confidence Waning?

Janashia noted that there was a reduced supply following the decline in price which began in the late 2017 which could raise concerns that investor confidence could be waning. Burniske on the other hand disagreed with this statement and noted that Bitcoin was shifting into a reserve asset. According to him, reserve currencies, as the market drops more people cling to it which in turn reduces the currency’s velocity.

It seems that there is varying analysis of the Bitcoin velocity. It’s important to have such analysis because it helps gain perspective on what’s happening regarding various cryptocurrencies more so Bitcoin.

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