Does Cryptocurrency Have a Future, or Why Cryptocurrency Is the Future?

Bitcoin is very often compared to gold, and indeed, you can draw some parallels between them. Gold is traditionally considered to be a hedge against inflation and a protective asset. Bitcoin that first appeared at the height of the global financial crisis in 2009, was also created to oppose the traditional financial instruments.

Historical Parallel

In the early 1970s, gold prices rose from $50 to $200 per troy ounce, and in December 1974, COMEX, the New York Commodity Exchange, introduced its first gold futures. In 1975, gold fell in price, but then went back up when the United States began experiencing high inflation. The Federal Reserve System head Paul Walker started his crusade against inflation, and the price of gold increased from $100 to $800 per ounce. The market was monstrously overheated, and when it became clear that the Fed was able to curb inflation, the prices collapsed once again. Next 20 years, gold was trading anywhere between $200 and $300 per ounce. Such high volatility proves that gold is not such a safe asset, after all.

Interestingly, the collapse of Bitcoin also began after its futures first appeared in December of 2018. The futures are a convenient tool for hedging and opening positions designed to lower prices, so it was only natural that overheated markets could not withstand the pressure from the hedgers and professional players who specialize in undermining overheated assets. 2018 became the beginning of the new era of regulation for the digital asset market.

Later, two pension funds owned by the management company Fairfax County Retirement Systems, as well as several insurance companies, have become anchor investors in Morgan Creek Digital (a fund specializing in digital assets). Fidelity Investments, an American multinational financial services corporation, launched a custodial service for Bitcoin for institutional investors. And even JP Morgan, whose CEO James Dimon has always criticized cryptocurrencies, launched its stablecoin.

The Future of Cryptocurrency

At the moment, the United States Securities and Exchange Commission (SEC) is still deciding on whether to allow the launch of stock exchange funds for crypto. So the future of cryptocurrency for 2020 is not defined yet. But as demand for this financial instrument continues to grow, SEC would be forced to allow sooner or later. And if Bitcoin is anything like gold, it may rise substantially after the launch of its own ETF.

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