Are you wondering if Bitcoin can help falling economies? Here is a guide on how this virtual asset can help failing economies.
The COVID-19 pandemic impacted many individuals and businesses globally. At first, it battered the economy while crashing global markets. However, during the pandemic, many people rushed to purchase. Also, the best way to earn is by trading and people may check bitalphaai de in case they are looking for a trusted bitcoin trading platform.
This digital currency, the world’s best asset over the last decade, is also one of the best ways to combat a recession.
Bitcoin Has a Fixed Total Supply
This virtual currency garners a lot of credibilities because its algorithm has stood the test of time. Since the inception of this electronic money in 2009, the Bitcoin protocol has regulated supply. And this has ensured that the pace of Bitcoin mining remains constant. Also, the added coins per block that miners generate keep decreasing.
Computing power refers to the demand for this virtual currency. Naturally, computing power has increased. However, unlike the effects of drilling activity on oil and gas supply, the amount of computing power involved in this virtual currency is irrelevant. It does not affect supply in any way.
Bitcoin is a Secure and Globally Transferrable Store of Wealth
The value of this digital money comes from its scarcity, security, and transferability. Like gold, this electronic money has characteristics typical of a commodity in that it has value regardless of how an economy performs. Unlike a stack, the upside of this electronic money is not directly the result of solid sector tailwinds, technological advantages, innovation, financial discipline, or a great management team. Instead, this digital money has value in both economic expansions and contractions.
A US dollar in France is the same as a U.S. dollar in China. However, the U.S. dollar is still the official currency of the U.S., meaning it comes with all the pros and cons of the U.S. economy. Moreover, it can be hard to obtain, store and use in a capacity other than cash in many countries.
On the other hand, this virtual money is inherently diversified because it is not subject to one economy’s gains or losses. Instead, Bitcoin represents wealth without borders. As seen in 2008, recessions can ripple through countries with shared economic interests. Although the U.S., E.U., Japan, and many other developed countries faced economic downturns in 2008, many of the world’s developing countries expanded from 2007-2009.
Outside of significant trends, the price of this digital currency can move based on regulation, environmental concerns, government crackdowns on mining, changes in institutional adoption, or any other factors. But again, these factors occur case-by-case, ensuring that the value of this digital money is not vulnerable to a singular event.
Bitcoin’s Weakness is Strength
Many people see this digital money as a risky investment because of decentralization and lack of backing from anything. Ideally, this electronic asset lacks any government guarantee or support from a business asset. That means an investor cannot recover anything if this digital money folds.
While lack of government support for the currency might sound terrible, the trait has a flipside. Since this virtual asset does not have a tie with any business or government, it cannot fall if a random country’s economy or company collapses. Perhaps, this is a significant strength for this cryptocurrency in the ever-changing market.
Innovation Improves the Economy During Recession
Innovation and adopting new technologies are the best ways to approach a recession. Surviving a recession requires businesses and individuals to adapt to new technologies. Technology is a vital asset for individuals and companies that want to adjust. Blockchain is already essential, making sense that it could be the item to carry people out of the next recession. Also, people investing in this digital money could reap the maximum rewards when a recession comes.
The Bottom Line
No asset is entirely recession-proof. While some people think Bitcoin could survive a recession, you cannot be sure that it will survive the recession and emerge stronger. Nevertheless, this virtual currency has proven its strength during the recent COVID-19 pandemic. Thus, it may be wise to buy and hold it in readiness for a recession.