Is Bitcoin safe as a configurable asset?

Last year was the year with the largest over-issuance of currencies in the world, and a huge amount of money flowed into the market, which made investors generally worried about inflation and their trust in "hard currency" declined. However, since last year, the price increase of Bitcoin has led all kinds of assets, and the price of Bitcoin has also repeatedly hit new highs. However, Bitcoin is also extremely volatile, with the largest drop of more than 15% on April 18, so it is more like a growth asset than a currency. From a medium and long-term perspective, the formation of Bitcoin price trends actually has the shadow of changes in the macro environment. As the first of a series of research reports on Bitcoin and the digital assets represented by it, this article analyzes it. Key takeaway: Rising demand for safe assets. The unprecedented new crown epidemic has had a significant impact on the global economy, which has also increased people's demand for safe assets. Judging from the situation in the United States, the epidemic has increased people's demand for precautionary savings, and the situation in my country is similar to that in the United States. From the perspective of income structure, the K-shaped recovery of the economy after the epidemic means that the proportion of wealth of high-income groups continues to increase, and in the context of rising security needs, the expansion of wealth of high-income groups will inevitably lead to an increase in the allocation of safe assets. Lack of "sense of security" in traditional assets. So, which assets can provide people with a "sense of security"? For a long time in the past, housing has been regarded as the asset that can bring the most "sense of security" in my country. However, under the policy background of "housing to live in, not speculation", the recent increase in housing prices has been far behind the level of previous years. Housing as an asset The "sense of security" brought about by the decline, and gradually returned to the positioning of the residential property. National debt is also often one of the sources of "security" in asset allocation, and several rounds of bull markets in the bond market in the past are not unrelated to this. At present, my country's 10-year treasury bond yield is still in the lower 30% quantile level, even if there is room for price increases, the range may be relatively limited. Not only has the "sense of security" brought by traditional assets in my country weakened, but overseas is no exception. The currencies of developed countries have always been regarded as an important target for overseas safe assets, but this time in response to the epidemic, central banks of various countries have "opened the floodgates", weakening the purchasing power of currencies. IMF: It is not an advisable shortcut to equate cryptocurrencies such as Bitcoin with national currencies: The International Monetary Fund forwarded a blog post by Rhoda Weeks Brown, the General Counsel and Director of the Legal Department of the International Monetary Fund on Twitter, and said that it is like Privately issued encrypted assets such as Bitcoin are accompanied by huge risks, and equating them to national currencies is not an advisable shortcut. [2021/8/29 22:45:17] What are the advantages of Bitcoin? Looking at the present, only gold and Bitcoin may be able to meet people's needs for a "sense of security" in asset allocation, and Bitcoin may have an advantage over gold. Bitcoin is not a currency in the full sense, but it is indeed an alternative asset for investment, and its market value currently ranks first among digital currency assets. First of all, the natural defect of Bitcoin as a currency is its advantage as an asset. Bitcoin has a natural defect of fixed supply, which means that if Bitcoin is used as a currency, it will bring deflationary troubles to the economy, but if Bitcoin is used as an asset against the flood of liquidity, fixed and predictable supply becomes One of its advantages. Secondly, compared with physical assets such as gold, Bitcoin in digital form is easy to carry and transfer, and does not have high storage costs, and its privacy is relatively strong. Finally, gold has basically withdrawn from the field of payment circulation, while the payment scope of Bitcoin is still expanding. It can indeed be seen from the flow of funds that the funds invested in gold may be turning to Bitcoin clues. "Security" is not perfect. In fact, Bitcoin is not perfect, and its biggest disadvantage is that it faces regulatory risks. Both the Federal Reserve and the Treasury Department have expressed negative views on Bitcoin, the essence of which is to worry about its impact on the credit of the US dollar. As far as our country is concerned, it may be difficult to promote Bitcoin on a large scale at present, mainly because the benefits it brings to the real economy have yet to be studied. The market value is limited and the market is yet to mature. In summary, the impact of the epidemic has increased the current global demand for safe assets, while the security that traditional assets can provide is weakening. Against this background, Bitcoin, as an emerging alternative asset, has played an important role in resisting economic recession and the flood of liquidity. But it is worth noting that the Bitcoin market is still to be mature after all, the regulatory measures are still not perfect, the current total market value is still small, and the price will inevitably have the characteristics of high volatility. Be cautious about speculative behavior in leveraged transactions. Viewpoint: Factors such as halving will push Bitcoin’s global computing power from the East to the West: Cambridge’s emerging financial center recently released a Bitcoin mining map, which shows that 65% of Bitcoin mining activities are still concentrated in China. In this regard, Alejandro De La Torre, vice president of De La Torre Poolin, said in a podcast panel discussion that in the early stages of Bitcoin, China had the right time and place; however, miners are now all over the world. He also pointed out that as Bitcoin continues to become the focus of attention around the world, computing power will also rise everywhere, and gradually move away from the centralization situation in China. Edward Evenson of Slush Pool said that due to global supply disruptions and blockade measures in several countries, the transportation of mining machines outside China has been hindered, and "transportation is very expensive, especially internationally." However, outside of China, the "total share of the global network" will increase, especially during the "non-rainy season," due to miners' reliance on cheap hydroelectric power. During the dry season, countries with “access to cheap electricity” like Russia, Kazakhstan, Canada, and the United States can gain a share of global computing power. Once the epidemic subsides, or countries are confident enough to reopen their economies, the global supply chain is subsequently restored, and the cost of electricity outside China falls, the global computing power will shift accordingly. (AMBCrypto) [2020/5/9] Bitcoin is "a ride away from the dust" Bitcoin's rise is the best. Since 2020, the price increase of Bitcoin has led all kinds of assets. As of April 16, 2021, the price of Bitcoin in U.S. dollars has risen by more than 780% from the end of 2019, and by more than 100% from the end of 2020. The current increase compared to the end of 2019 is "only" 57%, and the increase from the end of 2020 has not exceeded 10%, which is far behind the price increase of Bitcoin. Sound | Lang Xianping: Google achieves quantum supremacy but drags Bitcoin into the water: Economist Lang Xianping posted on Weibo today that Google achieved quantum hegemony but pulled Bitcoin into the water, which once again proves that I will destroy you and have nothing to do with you. Note: Before the news that Google claimed to have achieved quantum supremacy was swiped in various media, Google researchers said that Google processors can complete it in 3 minutes and 20 seconds, and it takes 10,000 years for the world's number one supercomputer, Scmmit, to complete it. calculation. [2019/9/28] The price of Bitcoin hit new highs repeatedly. Recently, the price of Bitcoin has repeatedly hit new highs. Judging from the closing price of Bitcoin on Bitstamp, the average closing price in December 2020 exceeded 20,000 US dollars per unit, and then successively exceeded 30,000 US dollars per unit from January to March 2021. 1, 40,000 USD/piece, and 50,000 USD/piece. In mid-April, the closing price of Bitcoin even exceeded 60,000 USD/piece. Although the short-term price has been adjusted, it is still more than 50,000 USD/piece. It is true that the short-term sharp rise in Bitcoin prices is not unrelated to trading sentiment, but from a medium and long-term perspective, the formation of Bitcoin price trends actually has the shadow of changes in the macro environment. As the first of a series of research reports on Bitcoin and the digital assets represented by it, this article analyzes it. Rising demand for safe assets The unprecedented new crown epidemic has had a significant impact on the global economy, which has also increased people's demand for safe assets. From the perspective of the United States, the epidemic has made people choose to save more money instead of spending it. After seasonal adjustment, personal savings accounted for more than 30% of disposable income, and this ratio was still in February this year. As high as 13.6%, excluding the epidemic period, this also hit a new high since 1976. Voice | George Kikvadze: Don't compare Bitcoin with tulips: George Kikvadze, vice chairman of Bitcoin mining giant Bitfury, tweeted on the 24th that uneducated people call Bitcoin a "bubble" and compare it to tulips and Nanhai, but they didn't realize that the latter collapsed and never came back. And every time Bitcoin goes through several adjustments, it will come back roaring (soaring). We found a big deal, folks, don't let the "experts" confuse you. [2018/11/24] The situation in my country is similar to that of the United States. The ratio of per capita consumption expenditure to disposable income of Chinese residents dropped sharply from 70.2% at the end of 2019 to 65.9% by the end of 2020, and this ratio continued to decline in the first quarter of this year. To 61.4%, residents' demand for precautionary savings increased significantly. From the perspective of income structure, the K-shaped recovery of the economy after the epidemic means that the proportion of wealth of high-income groups continues to increase. Taking the United States as an example, in October 2020, the proportion of the wealth of the top 1% of households in the United States exceeded 28%, setting a record again The new high since the statistics, my country also has a similar situation, the growth of the median per capita disposable income of residents cannot keep up with the overall growth rate. In the context of rising security needs, the expansion of the wealth of high-income groups is bound to bring about an increase in the allocation of safe assets. Lack of "sense of security" in traditional assets For a long time in the past, housing has been regarded as the asset that can bring the most "sense of security" in my country, and real estate has also become the carrier of residents' wealth. According to our estimates, real estate accounts for more than 70% of residents' asset allocation in 2019, which is about 2.4 times the size of residents' financial assets. U.S. Treasury Secretary: I don’t think Bitcoin can be called a currency: U.S. Treasury Secretary Mnuchin: I don’t think Bitcoin can be called a currency; the United States has the ability to supervise Bitcoin transactions, but I’m worried that the rest of the world doesn’t have enough monitoring of Bitcoin. To ensure that Bitcoin is not just used for illegal transactions. [2018/2/27] However, in the context of the current policy of "housing to live in, not speculation", on the one hand, the central bank conducts centralized management of real estate loans issued by commercial banks, restricts the real estate industry from the financing side, and stipulates that banks' personal housing The upper limit of the proportion of loan balance, which in turn limits the behavior of residents to buy houses with leverage. On the other hand, the requirement of "stabilizing housing prices" has also made the recent increase in housing prices far behind the level of previous years. Judging from the average price of housing samples in a hundred cities, the year-on-year growth rate was as high as double digits in 2013 and 2016, and the wealth effect brought about by rising house prices is enviable. Since 2019, this growth rate has dropped to below 5%. . The decline in the growth rate of housing prices has also reduced the "sense of security" brought about by housing as an asset, and it has gradually returned to its original residential property. During the period of economic growth decline and equity market adjustment, treasury bonds are often one of the sources of "sense of security" in asset allocation, and several rounds of bull markets in the bond market in the past are not unrelated to this. At present, although my country's 10-year government bond yield has risen significantly compared with the period when the currency was the most loose, it is still at the lower 30% quantile level. Even if there is room for price increases, the range may be relatively limited, and the margin of safety provided is slightly higher. Insufficient. The currencies of developed countries have always been regarded as an important target of overseas safe assets, such as the US dollar and the Japanese yen have always had such a status among investors. But this time, in order to deal with the epidemic, the central banks of various countries have "opened the gates and released water", and the degree of currency oversupply has increased significantly. In February 2021, the year-on-year growth rate of M2 in the United States exceeded 27%, while that in the same period in 2020 was less than 10%. The growth rate of M2 in Japan It also reached 9.6% in February this year, compared with only 3% in the same period in 2020, which has greatly weakened the purchasing power of the currency. Looking at the present, only gold and Bitcoin may be able to hedge against economic shocks and currency depreciation pressures, and meet people's needs for a "sense of security" in asset allocation. In this regard, Bitcoin may have an advantage over gold. It should be noted that although under the banner of "digital currency", we believe that Bitcoin is not a currency in the full sense, but it is indeed an investment option, and as an alternative investment asset, the current market value of Bitcoin is 100% higher than that of digital currency. Assets ranked first. Judging from the current market value, Bitcoin accounts for more than half of the market value of digital currencies, Ethereum ranks second, accounting for more than 10%, and the market value of other currencies does not exceed 5%. First of all, the natural defect of Bitcoin as a currency is its advantage as an asset. A large part of the reason why Bitcoin is difficult to replace existing currencies is that it has a natural defect of fixed supply. The current number of bitcoins in circulation is close to 19 million, and its upper limit is set at 21 million, which means that if bitcoin is used as a currency, it will bring deflation to the economy, or repeat the gold standard The fate of the Great Depression. But if Bitcoin is regarded as an asset against the flood of liquidity, the fixed and predictable supply becomes one of its advantages over gold. Secondly, compared with physical assets such as gold, Bitcoin in digital form is easy to carry and transfer, and does not have high storage costs, and its privacy is relatively strong, and its dependence on information networks is more suitable for the new generation. investor habits. Finally, gold has basically withdrawn from the field of payment circulation, while the payment scope of Bitcoin is still expanding. For example, the New York State Department of Financial Services has approved 28 virtual currency-related licenses, and the list of companies supporting bitcoin payments is also increasing, including Tesla, Microsoft, PayPal and other famous companies. It can indeed be seen from the flow of funds that the funds invested in gold may be turning to Bitcoin clues. For example, the total assets of the SPDR Gold Trust have dropped from more than US$70 billion at the end of 2020 to less than US$60 billion at present, while the total assets of the GBTC Bitcoin Trust have risen from about US$17.5 billion to more than US$40 billion at present. The "sense of security" is not perfect Both the Federal Reserve and the Ministry of Finance have expressed negative views on Bitcoin, the essence of which is to worry about its impact on the credit of the US dollar. As far as our country is concerned, it may be difficult for Bitcoin to be promoted on a large scale at present, mainly because the benefits it brings to the real economy have yet to be studied. According to Zhou Xiaochuan, the former governor of the central bank, "we must remind and be careful." Li Bo, deputy governor of the central bank, also pointed out at the Boao Forum for Asia that he is studying the regulatory rules for Bitcoin and stablecoins. If any stablecoin wants to become a widely used payment tool in the future, it must be subject to strict supervision, just like banks or Quasi-banking financial institutions are also heavily regulated. The legality of Bitcoin is not the same in all economies around the world. For example, Vietnam considers Bitcoin to be illegal, while mainland my country’s attitude towards Bitcoin is to restrict its use.

Tags：

BNB