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Earlier this week, the price of Bitcoin reached $61,000, giving it wider market supremacy. Though concerns about Bitcoin’s unpredictable price and ability to hedge inflation remain, analysts such as French economist Marion Laboure concluded that the currency is now “too important to disregard.” Aside from BTC’s trillion-dollar market cap, its “potential for sustained price increases” are essential factors in its success.
Both central banks and governments recognise that “Bitcoin and other cryptocurrencies are here to stay,” according to Laboure. She claimed that governments would “begin regulating” cryptocurrency assets “late this year or early next year.”
The economist suggested Bitcoin fell short in some areas; she said that when it came to “transactions and tradability,” the crypto is “still limited.” More importantly, the researcher raised the question:
…The real debate is whether rising valuations alone can be reason enough for bitcoin to evolve into an asset class, or whether its illiquidity is an obstacle.
The analyst attributed the story to the ‘Tinkerbell Effect,’ an economic term focused on Peter Pan that states that the more people believe in something, the more likely it is to occur. She noted that the valuation of Bitcoin would begin to fluctuate “depending on what people think it is worth.”
Bitcoin should continue to rise
According to Laboure’s microeconomic research, hedge funds and institutional investors were a significant factor behind increased demand for the commodity, and as a result, Bitcoin “should continue to grow.” She noted that expectations of Bitcoin’s collapse have been diminishing, with 2020 having the “fewest Bitcoin obituary predictions in eight years.”
Another encouraging sign was the adoption of blockchain wallets, which are “equivalent to those of the Internet.” If current trends persist, there may be “200 million” blockchain wallet users in a decade.
Why Bitcoin has an ‘ultra-volatile’ price
Although Bitcoin is the world’s largest cryptocurrency, it is mostly used as a financial investment, with less than 30% of Bitcoin-related transactional operation being for payments. The liquidity of cryptocurrency as an investment commodity remains poor. In reality, the liquidity of the asset is said to be far similar to that of the Thai baht.
In addition to “limited tradability,” Laboure predicted that Bitcoin will remain highly volatile. She warned that a few further whale sales or exits could “significantly affect the supply-demand equilibrium,” and added:
“The root causes of Bitcoin’s volatility include small tactical asset allocations and the entries and exits of large asset managers.”
Future generations, according to the researcher, “will usher in mass adoption.” For example, according to a Deutsche Bank survey, cryptocurrencies are rapidly replacing cash and bank cards among millennials, as shown in the image below:
Finally, the economist forecast that in the long term, “there would definitely be no room” for using cryptocurrencies as a currency. “widespread means of payment,” especially when central banks may not give up their “monopolies.”