Translated by Clem Chambers for Forbes . Chambers is the director of ADVFN.com, a private investor site, and the author of The Be Rich, The Wall Street Game and Cryptocurrency Trading: A Guide for Beginners. In November 2018, Chambers won the Journalist of the Year Award in the Business Market Comments category of the State Street Institutional Press Awards.
Gresham’s law states that “the worst money drives the best out of circulation.”
Is Bitcoin Good or Bad Money? Should Bitcoin be the worst money to replace fiat? If this is better money than fiat, then fiat should supplant bitcoin, and cryptocurrencies cannot have a future unless they become "bad money." Or not?
According to Gresham’s law, bad money takes good money out of circulation, because people save up good money, and bad money buy goods and services. And this is exactly what is happening with fiat and cryptocurrency right here and now.
The trade war between the United States and China means that yuan is bad money, and bitcoin is good money. Bitcoin is growing rapidly in price, because in Asia there are large buyers of bitcoin who want to get out of the renminbi and get dollars or something else, but not a falling fiat. For bitcoin, you can buy dollars at any time. Moreover, being “good money”, it will grow against the dollar along with an increase in demand for bitcoin. Obviously, if people thought that bitcoin would depreciate, and if they had fiat and cryptocurrency, then they would spend cryptocurrency, and Gresham’s law would work in the opposite direction.
So, the current reason for the rise in the price of bitcoin is associated with China and the United States. If the trade war continues, the price of bitcoin will rise. This is a bullish scenario:
On the chart, we can see the bearish one, which suggests that the bulls could not keep the mark of about $ 14,000, which was the peak of the rally, and Bitcoin could easily fall to $ 8,000 and, possibly, even to $ 6,000.
And this is entirely possible, but for me the bullish scenario is much more convincing, because the end of the trade war between the USA and China is not yet visible. In the long run , the Buy and Hold (HODL) strategy seems to me the most profitable .
I am pretty sure that Trump will for some time cause Bitcoin and gold to flourish (and Bitcoin will grow especially hard). Undoubtedly, the fear of the devaluation of the Chinese yuan has already led to an increase in the price of bitcoin.
For me, the best that Bitcoin can offer now is that it provides reliable protection against stock correction caused by a trade war. In this dynamic, bad news for stocks is good news for cryptocurrencies, because bad news for trading is bad news for stocks. Bad news for trading is bad news for the renminbi, but great news for bitcoin.
Publication date 08/06/2019
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