March 28, 2024

An increase in geopolitical risk will lead to an increase in the rate of bitcoin

An increase in geopolitical risk will lead to an increase in the rate of bitcoin

In just three months, 2020 has presented us with many surprises. The year began with a serious geopoliticaltensions between the US and Iran, now we livein the context of the COVID-19 pandemic, which is rigorously testing the strength of most economies in the world. Amid growing global uncertainty, investors are looking for assets to hedge risks.

In the first decade of the month, a liquidity crisis amongmajor investors sharply reduced the price of bitcoin in a matter of hours. In this regard, investor concern about safe assets has further intensified.

Parallax Digital founder and CEO Robert Breedlove commented on the current market uncertainty in the last episode of the Bitcoin Echo Chamber podcast:

«Uncertainty in the world is increasing... Withoutconfidence, you will reduce your investment activity. In addition, the accumulation of money will slow down. And no matter what, the US dollar is now the most liquid instrument in the world.

Gold has traditionally been considered a safe haven asset. Considering the basics of its value, Breedlove suggested that gold and bitcoin satisfy the deficit ratio. However, the value of such assets is determined by the cost of its production.

«In fact, the metal itself is to a small extentaffects the cost, the energy required for its extraction plays a big role. The same goes for bitcoins. The energy required for computing provides its value. Thus, commodity prices tend to move closer to production costs»- added Breedlove.

Due to the fact that hashrate is growing, the marketmining is becoming increasingly competitive. Bitcoin is becoming more and more expensive to mine, so the price of the asset should show an increase in the future. Especially if we take into account the upcoming halving in May 2020.

An increase in geopolitical risk will lead to an increase in the rate of bitcoin

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According to Coinmetrics, the level of complexity of the Bitcoin network is constantly growing, although after a recent drop in prices, there has been a slight decrease.

A recent study published by the University of Pretoria notes that an increased level of geopolitical risk can benefit Bitcoin:

&#171;The increased level of GPR will likely have a positive impact on the price of BTC, as investors still view Bitcoin as a hedge against global uncertainties&#187;.

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