January 12, 2019

St. Louis Federal Reserve Report: Increased Supply of Altcoins Will Decrease BTC’s Value

The creation of competing altcoins is likely to place downward pressure on the prices of all cryptocurrencies, including bitcoin BTC (BTC). This conclusion was found by research conducted by the Federal Reserve Bank of St. Louis and published on Jan. 11.

The report cites two perspectives: bitcoin BTC bulls’ belief that the capped supply and increased demand will increase BTC’s price, and the bears’ belief that its price will fall to zero. The researchers state:

“We think the future price path is more likely to remain bounded between these two extremes.”

According to the research, the United States dollar price of BTC will also depend on its exchange rate relative to altcoins. The report explains that the bulls expect bitcoin BTC to appreciate relative to altcoins, or to keep its market capital relative to the global crypto market cap constant. Still, the researchers show that this hasn’t been the case so far.

bitcoin’s crypto market share April 2013-December 2018. Source: Federal Reserve Bank of St. Louis

According to the researchers, the chart suggests that the increasing supply of altcoins keeps bitcoin BTC’s price and market cap depressed. Still, according to the report, bitcoin BTC has a fundamental value that will prevent its price from falling to zero that derives from demand for its permissionless access and decentralized database. The report concludes:

“While bitcoin BTC’s price is not likely to fall to zero, the prospect of a flood of Altcoin competing with bitcoin BTC in the wealth portfolios of investors is likely to place significant downward pressure on the purchasing power of all cryptocurrencies, including bitcoin BTC.”

As Cointelegraph reported today, the number of active bitcoin BTC (BTC) wallets, many of which have long been dormant, has seen an uptick that could herald some major market movements.

Also recently, news broke that Vinny Lingham, CEO of blockchain identity platform Civic, has revised down his short-term bitcoin BTC price prediction, stating that the top coin could now fall below $3,000.

Published at Sat, 12 Jan 2019 12:02:00 +0000

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January 10, 2018

Venezuelan Senate Outlaws the Creation of the Petro Cryptocurrency

Most people are well aware of how Venezuela wants to create its own cryptocurrency. Known as the Petro, this new form of money is backed by the country’s natural oil reserves. Although president Maduro has planned to issue quite a few of these coins in the near future, that may not happen after all. More specifically, the Venezuelan Congress outlawed the Petro cryptocurrency altogether. In their opinion, this new currency is an “effort to illegally mortgage the country’s oil reserves”.

Venezuela is a country on the verge of collapsing financially. A lot of problems have arisen in recent years and the situation only grows direr. Coming up with a solution to these problems has not been easy. President Maduro has experimented with a few different solutions, but not made any real progress. Instead, he wants to resort to creating a national cryptocurrency, known as the Petro. Backing the value of this currency are Venezuela’s natural oil reserves.

What Will Happen to Venezuela’s Petro?

On paper, this concept makes a lot of sense. It would provide some financial relief for the struggling nation in the coming months and years. Unfortunately, Venezuela’s government isn’t too keen on this idea whatsoever. In fact, they outlawed this cryptocurrency from being created and issued altogether. A remarkable turn of events, although such a move was to be expected at some point. The opposition-run parliament feels President Maduro wants to illegally mortgage the country’s oil reserves. Some very harsh language is being used to make this point even more apparent.

Issuing the $6bn worth of Petro will not happen anytime soon due to this decision. Venezuela needs hard currency and evade financial sanctions at the same time. Without this cryptocurrency, that may become an insurmountable challenge. At the same time, financial experts tear this currency will lead to even more financial mismanagement by the government. The big question is whether or not investors are even interested in the Petro at this stage. Right now, that doesn’t appear to be the case, but things can always change in the future.

For the time being, it remains to be seen how this situation will evolve. It is evident Venezuela’s economy is crumbling as we speak. This situation has gone from bad to worse in quick succession. A national cryptocurrency may very well be the country’s last resort. Unless the Senate reverses its decision, that currency will never exist in an official capacity. This is a very interesting situation well worth keeping an eye on. After all, the Petro may set an international precedent in more ways than one.

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November 5, 2018

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