Coronavirus pandemic has had a very devastating effect on the world economy. It has caused all the investors to go in search of assets that can provide safety and security during the tough times and a hedge against global events.
Cryptocurrencies and bitcoin have come out as saviors against the economic slowdown due to the coronavirus pandemic, dropping GDP, fiscal stimulus and government bailouts. For more information visit Bitqh.
Crypto assets are famous for their knowable, fixed and verifiable supply. They’re controlled or regulated by any global superpower or political leader. The main question is whether all these qualities qualify bitcoin and other cryptocurrencies to serve as a hedge. And, if it is indeed smart, how can you get more exposure to the cryptocurrency while also avoiding any risk?
According to some bitcoin experts, the acute increase and drop of the bitcoin value are not precisely related to the coronavirus pandemic or its impact on the share market.
What is halving?
These unpredictable changes in the value of bitcoin are directly related to the phenomenon miners called halving. Halving occurs in every four years, and each time 210000 blocks are mined. The last time halving occurred was in 2012, and it showed similar predictable ups and downs in the prices of bitcoin.
Mathematically, Halving is when the miners get a reward in the form of 50 BTC for mining the first 210000 blocks. However, the one to mine the first block after these 210000 blocks gets 25 BTC, i.e. half of the reward. Now because the number of bitcoins is fixed, similar events of Halving will only occur every four years until 2140.
Investing in bitcoin
The idea behind investing in bitcoin is just as same as investing in any other asset. People buy bitcoins when they believe that its demand is going to go up, increasing the value of bitcoin in the coming month or year. This way, you can sell the assets at a higher rate and earn a profit. But if it is so similar to other sorts of trading, what’s the “number go up” mean that the crypto traders refer to jokingly?
Bitcoin is considered a pro-version trading option. It’s looked upon as an attractive investment and is considered supremely safe.
Some say that bitcoin is equivalent to what gold was in the 70s. The trust in Bitcoin is only going up with each passing day.
The On-chain data also portrays bitcoin’s future in a rosy and lucrative manner.
At last, the supply of bitcoin reduces with time due to halving in every four years. This increases Bitcoin’s stock-to-flow.
Inflation and its effect on bitcoin
As opposed to other assets and fiat currencies, bitcoins are limited in number. Their value hence is preserved. The blockchain system is constructed in a way that there’s always going to be a fixed number of bitcoins to be mined. There’s little to no chance that any economic crisis, like the corona virus pandemic, will have any effect on the value of the crypto assets.
To keep a check on the circulation of bitcoin, Halving is an absolute essential. Experts claim that halving event doesn’t immediately affect the value of bitcoin. The cost is predictable regardless of the economic disturbances and fluctuations in the fiat currencies.
This law confirms the principle that the size of a network decides the value of the network. All this makes the price of bitcoin pretty much predictable and makes bitcoin a safer alternative for investment during this coronavirus pandemic or crises.
Investment in other digital assets
There are thousands of other assets and cryptocurrencies in the market other than bitcoin. But yes, only very few of them are worth considering for investment purpose. Only a handful of them serves as a potential hedge in economic crises.
The risk is high when the market capitalization of the asset is small. But with high risk also comes high potential upside. Hence, you must get good knowledge about the cryptocurrency you want to deal in before investing. You much learn about the blockchain network that it powers and its function within it.
There’s no shortage of opportunities for investors that are looking for the “alpha” within the crypto world. Just keep in mind that the crypto assets are always very much related to the bitcoin and depend highly on its performance. Bitcoin generally takes every other investment in the market up when it’s in the bull market.