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Bitcoin becomes a means of accumulation

FXcoins - Bitcoin becomes a means of accumulation

Senior economist, Bank of England Peter Zimmerman believes that stable growth of Bitcoin prices is gradually turning cryptocurrency into a lucrative means of accumulation. Limits coins make the reasons for the emergence of a certain conflict between those who look at bitcoin as a tool for calculations, and those who look at it as the asset for re-export. The first currency becomes in some sense “gold”, as the volatility increases and people begin to accumulate.

 

Zimmerman said, “with the increasing prices of the crypto currency people are starting to look at it as a tool of capital accumulation. They don't want to waste it on Commission and they have to face a longer processing transactions. I call this effect “digital gold”: with the increase in the value of cryptocurrency becomes a means of accumulation, not the means of payment”.

 

One of the important observations of the economist was that Bitcoin caught on the so-called “catch-22”, which suggests that any of the scenarios leads to negative consequences. The higher the demand from investors, the lower the efficiency of Bitcoin as a payment instrument. As with growth rates, the load on the blockchain grows doubly subsequently declines the transaction rate and the value of the cryptocurrency.

 

“The value of Bitcoin is determined by its use as a tool for making payments, however, blockchain limited space to add transactions. Because of the speculation reduced monetary characteristics of cryptocurrencies, which undoubtedly affects its price. In this regard, we can draw the following conclusion: the increase in speculative demand reduces the price of the cryptocurrency. Although the conditions of the standard economic model of the relationship should be the opposite – an increase in the number of transactions should increase the price,” says Zimmerman.

 

A similar situation occurred in 2017, when the price of Bitcoin surged to almost 20 000 USD, as due to overload of Nampula cost of the transaction amounted to several tens of dollars.

 

In the Bank of England determined the cause of volatility: first, the price increases and Bitcoin becomes less valuable as a means of payment, then the price is lowered. After the price crashes, Bitcoin is once again becoming attractive as a means of payment, so the price begins to grow again.

 

In the end, Zimmerman added, “recently begun to develop the derivatives market with payments in traditional currency, has also been running Lightning Network. These events can have significant consequences.”

17 February 2020

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