If you log into your Bitcoin Wallet today you will see a huge decline in the value. The price since the start of the year has been on a steep decline. It has not been helped by all the negative stories about cryptocurrency splashed across the press and each time we see a huge drop in price, many think that the crypto party will come to an end. One of the major mistakes that are taking place is that judgment has been made too fast. If you look at the returns it has produced consistent each year and not the price fluctuations each month, it is the best asset in the world to hold over the long-term.
#1: Interest Rates
One of the biggest causes of bubbles popping is the sudden rise in interest rates. All different types of fiat money finances are tied to interest rates such as mortgages, bonds, loans, derivatives etc. The scale of the finances around the world tied to interest rate has never been so high before and when these go up slightly it will make most of the financial instruments too expensive which will result in a collapse. Bitcoin and cryptocurrency do not have an interest rate, therefore, it is immune to this type of bubble.
#2: Government Interference
All Governments around the world tend to make the wrong choices when it comes to finances and economics. When the 2007/08 financial crisis hit the Governments and central banks came in and pumped trillions around the world into banks to keep them afloat. This was meant to be only a temporary solution but it is 10 years since the financial crisis and banks still need quantitative easing to keep their doors open. If this were to stop, the banking system would collapse and anyone with a bank account will lose their life savings. The problem is that it is impossible for this to go on forever and we are coming to the end of the road. The more money you print the more worthless it becomes.
When the world’s largest Bitcoin exchange at the time mtGox collapse there was zero government interference. This meant that many lost all of their money but it also meant that without Governments putting money in to try to solve the solution a bubble was not created that can never be paid back which is why BTC is a better long-term investment. What could cause cryptocurrency and Bitcoin to collapse completely is a complete worldwide ban on exchanges. This has just happened in India and if other parts of the world follow it will be hard for crypto to survive.
#3: Safe Haven
The underlying technology behind Bitcoin (The Blockchain) has proven that it makes a superior financial system. It also gives users the chance to store their money offline in a hard wallet to make it ultra secure. If one bank collapses it has a domino effect due to inter-lending between banks. When Morgan Stanley collapsed it brought down all the others with it and in the end they needed bailing out to survive. With Bitcoin, if one exchange collapse it does not impact the others which makes a far safer.
Bitcoin and crypto cannot be compared to fiat money as they both work completely different. The mainstream media are ignoring the real bubbles such as the stock market, real estate market, bond market, and derivatives markets. These are all real bubbles and are interlinked to each other. If one pops they all pop and when they do the price of cryptocurrency will skyrocket, the big questions is though will Governments allow it to replace the old system or not?