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25.02.202117:22 Forex Analysis & Reviews: Bitcoin: an artificial gold. How limited is its functionality?

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Sharp jumps in value, overestimated growth, a certain dependence on investment injections, financial reports, and economic indicators - all this characterizes Bitcoin. All of the above can also be reduced to one definition - high volatility.

Warren Buffett's colleague and one of the directors of Berkshire Hathaway, Charlie Munger, is very skeptical about Bitcoin. According to the entrepreneur, the digital asset is only "artificial gold", and its functionality is limited due to high volatility. Munger is confident that Bitcoin, like any cryptocurrency, will not be able to become a full-fledged financial instrument. The reason is the same - the high volatility of the asset.

Exchange Rates 25.02.2021 analysis

However, based on the latest trends in global markets, most of the community disagrees with Charlie Munger. Many financial giants do not hesitate to invest hundreds of millions of dollars in Bitcoin, banks with a worldwide reputation and long history are launching new mechanisms to provide their users with the opportunity to trade and store cryptocurrencies. The world's largest payment systems are also announcing, one after another, the creation of algorithms and software for transactions with digital assets.

Exchange Rates 25.02.2021 analysis

Portuguese energy companies and engineering giants Tesla Motors are announcing the possibility of paying for their products with Bitcoin. Asian financial companies are allowing their clients to lease cryptocurrencies, and the director of the company Twitter is investing millions of dollars in researching new opportunities for Bitcoin. Based on this news, which appeared in just a few months, global financial institutions are actively considering the possibility of introducing cryptocurrencies as full-fledged financial instruments.

The main problem why cryptocurrencies cannot become a full-fledged means of household financial transactions is their high volatility. However, there are many prerequisites for the fact that this negative effect will soon decrease. There are several ways to overcome this phenomenon.

One of them relates to the strengthening of Bitcoin's position as an independent market participant, independent of external factors, such as investments and various news. This path is very long and requires certain circumstances in the market, constant financial injections, research, and active use of digital assets in transactions.

The second method is rather an alternative for the period of strengthening bitcoin as a financial instrument. It consists in creating a certain software or algorithm that will allow converting coins into more stable financial instruments at a fixed rate. In any case, there are all the prerequisites for the cryptocurrency and bitcoin market to move towards significantly expanding their capabilities and becoming a full-fledged means of carrying out financial transactions.

Eseguito da Artem Petrenko
Esperto analista di InstaForex
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