The writer has a business administration and marketing background and is an upcoming private entrepreneur in Islamabad. He can be reached at saad.gul2@gmail.com
Bitcoin has been the fastest-growing asset class. While it can generate a significant amount of return, it can also be very volatile.
Will there be more reasonable answers by the Securities Exchange Commission (SEC) regarding treating Bitcoin as an asset class versus commodity before the year ends? Do investors continue to see the increasing potential of digital gold? Will it sustain the time test and hold its value? Will launching Bitcoin Futures in 2019 Q1 help lay a solid foundation for institutional money to pour into the cryptocurrency markets? Moreover, it is worthwhile to examine whether this digital gold can scale to be more widely accepted by merchants and retailers, besides on-boarding more customers in 2019 or not? Ripple’s XRP seems to have gained solid grounds. Although profits still exist in a down market, will multiplying funds be quicker next year? Will next year see the birth of new spot exchanges or will the current ones continue to capture larger market share?
Only time will untie these complicated knots as we eagerly wait for answers.
Will we soon be seeing a solution to integrating Bitcoin into the global financial ecosystem? Early in January, Bitcoin achieved a market capitalisation of around $813 billion. How does this compare to all the money in the world?
The combined value of the world’s bank notes and coins is roughly $7.6 trillion. The world’s above-ground gold, according to World Gold Council, estimated at 187,200 tonnes, is a whopping $7.7 trillion. Global Stock Markets equal $73 trillion and the estimated value of all developed real estate in the world amounts to $217 trillion.
The low-end estimate of the size of the Derivative Market is $544 trillion whereas the high-end estimate of all derivatives contracts is $1.2 quadrillion. Banks typically have high amounts of leverage which allows them to privately trade derivatives ‘over-the-counter’ instead of regulated exchanges. This makes it almost impossible to know the exact size of the market.
Attempting to break down the established networks of fiat money markets into the aforementioned categories helps to simplify an intricate multiverse of currencies, assets, and other financial instruments. How microscopic is Bitcoin in the grand scheme of things? We would still need another few years before we can start getting a clearer picture of things.
Will Blockchain technology continue to build upon the existing infrastructure? Some blockchain startups in the West like ConsenSys and Steemit have started laying employees off while China’s internet giants like Alibaba and Tencent are investing more in the blockchain. With way more advanced AI capabilities and increasing computing power, will economic advantage shift more towards the East?
Considering that all cryptocurrencies are extremely volatile and the stance with regulations is yet to be stabilised, it’s hard to determine the likelihood of some trends being lasting and powerful. With proper laws in place and rational taxation policies, both digital currencies and countries’ economies can win. But unreasonable legal, institutional and technical barriers continue to prevent this win-win for both. Only progressive state regulatory frameworks can create the space for such a win-win situation in an era that is increasingly reliant on smart data and emerging technologies.
Published in The Express Tribune, December 22, 2018.
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