Bitcoin is “Digital gold” of post — COVID pandemic era.Explore former IMF Senior Economist opinion with XcelPay Wallet.
Taimur Baig, former Senior Economist at International Monetary Fund (IMF), Deutsche Bank, and Monetary Authority of Singapore has compared cryptocurrency to “digital gold” of post — COVID pandemic era.
Taking a macroeconomic point of view on the matter, Baig says while yields on fixed income securities are nose-diving to zero, there has been a steady rise in gold prices. He says the conditions have propelled Bitcoins to make a “convincing comeback”.
To further this point, the report by DBS Group Research published last month in August gives us an insight into Crypto trends. The report has highlighted that as momentum of the cryptocurrency market picks up and new protocols emerge, Global regulatory bodies are beginning to prepare their own infrastructure to harness this momentum. It is noteworthy that the trading volume of Bitcoin has surged since 2017, rising from USD18mn per day in 2013–2016 to USD507mn between 2017–2019. As of mid-June the market capitalization of Bitcoin was USD170bn, making it the most dominant cryptocurrency in the market- almost six- folds higher than Ethereum.
Some people may like to perceive Cryptocurrency Trade as akin to Foreign Exchange Trade where a currency in foreign denomination is exchanged against Dollar. However, Baig points out an alternative. Cryptocurrencies are not tied down to a country’s economic activity, so a change in a country’s productivity or long-term growth will not be reflected in the Cryptocurrency movement. Just as foreign exchange rates may go up or down depending on appreciation or depreciation of the dollar, the same will not happen to cryptocurrency. Due to its “system-based circulation” feature, crypto assets are likely to behave like Gold. ‘They will not go up and down as the US economy goes up and down, from this perspective it’s more akin to Gold than FX , in my view” he says.
Furthermore, Baig has identified the pre-pandemic and the post-pandemic demand of Bitcoin. He interestingly points out that while pre-pandemic demand of Bitcoin was speculative in nature, post-pandemic demand will be based on the logic of fixed circulation. “People are worried about dollar outflow and are wondering to hold crypto assets in addition to gold as safe-haven currency,” says the DBS Bank Economist.
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