Oanda’s Head Crypto Trader Thinks Bitcoin Is Likely To See More Short Term Depreciating Value
Bitcoin Price Likely To Continue Depreciating –Stephen Innes
Bitcoin is primarily used as a store of value for many investors. They buy with the sole intent of watching the value increase, so they can either sell, trade or use it for some purchases. However, some analysts don’t believe this to be true.
According to them, bitcoin currently has no use case. As a result, this doesn’t qualify the coin to be used as a store of value. One of these analysts is Oanda’s Stephen Innes.
Currently the head of Asia Pacific trading, he believes that bitcoin is likely to suffer another major price drop, largely because of the absence of a tangible use case. In fact, he compares bitcoin’s speculations to that of the worst hype in the history –the Tulip Mania.
So far, bitcoin has lost an estimated 80 percent value in 2018, with the hardest losses seen in November. In that month alone, its price plunged by another 48.5 percent.
This huge price depreciation has seen the cryptocurrency currently sticking to a new bottom of $3,200. Compared to its almost $20k price at the height of its appreciation, the current price is a steep fall.
According to Innes,
“It’s been a disastrous year for cryptos,”… “and by all indication, the current bear market could go from bad to worse with no fundamental or underlying reasons to buy BTC even more so when the only support offered up is a squiggly line on an analyst chart.”
Bitcoin’s Brief History
The original intention of Satoshi –bitcoin’s inventor- was to make it an alternative currency that would eventually start the revolution that will see fiat currencies phased out. Bitcoin had positioned itself as a faster, cheaper, and more decentralized alternative.
This didn’t make it really a currency per se. If anything, there had been some other use cases arising from its innovative solutions. For instance, as it grew in popularity, many people started seeing is an investment tool, while others considered it the default currency for all illicit marketplaces and trades.
So far, these features have been in a state of flux, depending on the user in question. Ultimately though, it has remained a highly dynamic cryptocurrency with a constantly changing use case.
Innes’ case about bitcoin not proving itself as a currency due to its lack of a solid use case is a valid point. And this is even more so considering that bitcoin suffers from one major flaw: extreme price volatility.
The reality is if bitcoin can find a way to reduce its volatility, chances are that it might actually stand a chance at becoming an alternate currency, and get a lot more trust from users. In fact, this would solve most of its problems and eliminate the doubts of many intending investors.
Historical Precedents for Crypto?
All assets typically have a back story, with quite a few of them known to struggle with acceptance and adoption. Some of these formerly beleaguered assets have now been accepted as stable and recommended investment tools. One of these is gold.
During Richard Nixon’s presidency, he toppled gold’s global value, replacing it with the US dollar. This happened in 1971, and saw the price of gold become incredibly volatile. Speculators and investors were worried about its future value.
This saw the asset struggling with acceptance, often losing significant percentages of its value within a year. This happened once in 1975, when it lost 25 percent of its value, and in 1981 when it lost another 33 percent. Before both incidents though, the value of gold was pumped up by 74 and 121 percent respectively. Sound familiar?
This is similar to what bitcoin is currently dealing with. Of course, bitcoin is no gold, but still there’s strong resemblance in their volatility. Critics would rather not agree that it be used as a store of value, because of its volatility.
They believe that it would need to be exhibit stability over a prolonged period before it should be granted that status –a yardstick similar to current traditional assets and fiat currencies. However, bitcoin is different; the technology is different too.
So, antagonists like Innes might need to take this into consideration when they’re making an argument for bitcoin’s non use case and volatility. The reality is that if more traders and investors hold on to it, during periods and there’s a small, restricted supply, it will function effectively as a currency and store of value.