What is Behind the Soaring Price of Bitcoin? May be the Rich
Bitcoin’s price remains at a peak about $7,300, breaks the record from the recent nine months. Since May 10th, the price of Bitcoin has increased by 4%, 7% and 10% per day respectively, compared with the past three months, the price of Bitcoin has risen by more than 100%.
Bitcoin’s rise is indeed worth celebrating, but there are also some questions worth pondering: What is the logic of Bitcoin’s rise? How long will the rise last? Is the soaring price for new reaping, or will it usher in a new bull market? Or there is a hidden truth behind?
There are countless reasons for the rise of bitcoin prices, but for most investors, or those who stand outside the market, maybe the rise in speculative sentiment to account.
The Uncertainty of Credit Currency
From 2001 to 2007, the dollar depreciated by more than 40%, the price of crude oil and gold increased for several times, and many people were very dissatisfied with the depreciation of the dollar. For example, if you ask him whether the Federal Reserve will raise or cut interest rates, whether the balance sheet will expand, he will tell you that the future will also depend on global macroeconomic trends, the U.S. unemployment rate, inflation and other data, not because they fool you, but because of these factors themselves, which determine the issuance of the U.S. dollar.It increase the factors of uncertainty.
On the contrary, Bitcoin clarifies the circulation and solves the uncertainty of currency circulation. More importantly, Bitcoin shows the world how it can achieve a fixed circulation. Therefore, the real value of the blockchain technology used by Bitcoin is a proof process for the circulation and safe operation of Bitcoin. A person willing to hold Bitcoin actually buys a fixed-issue currency or commodity.
Uncertainty in Financial Services Institutions
As intermediaries, banks, payment and settlement companies and so on, there is actually a problem, that is, the uncertainty of systemic risk. For example, some people will care about money deposited in the bank.They wonder what the bank does with the money, how to ensure that the money can be safely and punctually transmitted to the other party if they make a payment, and so on.
In early April, the Securities and Exchange Commission (SEC) approved a company that issues “digital money” to raise money by selling a custom encrypted currency. This is the first “no objection” letter issued by SEC for blockchain financing. Why can the company get a “no objection” letter? The reason is simple. The company’s encrypted currency is only used to help users book private jet travel, but the restriction of bank’s business hours brings a problem to charter industry. Rich people may need telegraphic transfer at any time, but they are restricted by bank’s business hours. Traditional financial channels may take too long. This problem can be solved if encrypted currency without any financial intermediary is put into use.
Bitcoin can skip banks and any third-party intermediaries, achieve payment in any time, without time and geographical constraints, and there is no problem of counterfeit, which greatly reduces the transaction costs of financial institutions.
Uncertainty of State Barriers
Nowadays, many countries still adopt different levels of capital control and currency exchange barriers, but for many people who live a crossed-nation life, these problems are very troublesome.
In March 2018, the German National Tourism Agency announced that it would accept Bitcoin and other encrypted currencies as compensation for its services. In August of the same year, the Queensland Government of Australia donated funds to the Travel by Bit Digital Money Payment Platform, which aims to promote tourism in central Queensland by selling encrypted currency travel preferences.
For many rich people, perhaps the biggest problem for them is not the destination to choose, but dealing with the various transactions and payments in the travel process. The certainty of Bitcoin is that you can hold Bitcoin and, in most countries of the world, convert it directly into local currency without transnational transfers. So the Bitcoin may become games of the rich.
So as a social resource, Bitcoin is destined to flow from the middle class to the super-rich. This is in accordance with Coase’s theory of property rights. In the end, who can use it well, or in whose hands it plays the most value, it is belongs to whom.
The logic of the rich is totally different from that of the ordinary. When you are concerned about earning money, they are concerned about how to distribute wealth. When you are studying investment, they are considering liquidity and security. When you are considering security and liquidity, they are studying cross-border or cross-regional financial integration. When you are studying cross-border investment, they begin to pay attention to ultimate inheritance and cultural connotation.
In short, the rise in the price of Bitcoin is not a Utopian fantasy of geeks or a dream of becoming rich for the grassroots. On the contrary, it tell us that many rich clubs around the world have begun to offer Bitcoin services to the super-rich.