Federal Reserve: Altcoins Drag The Price Of Bitcoin Down

Federal Reserve Altcoins Drags The Price Of Bitcoin Down

The Federal Reserve Bank of St. Louise released an article saying that bitcoin has two potential futures. To grow indefinitely or to disappear. They think the outcome will be in-between.

Federal Reserve: A bullish case for bitcoin

Predictions for bitcoin are released regularly, but the truth is that no one knows since not even the federal reserve can predict the future. Many industry leaders and investors are bullish when it comes to cryptocurrencies and bitcoin. Tim Draper predicts a price per bitcoin around $250,000 around the year 2022. Thomas Lee is a bit more modest and stated that fair future value would be around $150,000 per coin. However, he said that a fair value right now is over $13,000 per coin. Sonny Singh revealed that an approval of a bitcoin ETF is determined the value of bitcoin. He said that an ETF could bring the value of bitcoin back over $20,000.

The Federal Reserve of St. Louise released an article discussing the very matter. It is not an easy thing to evaluate cryptocurrencies and bitcoin, but they gave it a go. The bullish case is that Bitcoin will appreciate indefinitely due to its capped supply and an ever-growing demand.

The authors, David Andolfatto and Andrew Spewak, conclude that one of the factors dragging down the price of Bitcoin is an ever-expanding supply of alternatives. Bitcoin is an inherently speculative and volatile asset. A fixed supply doesn’t mean an ever-increasing value. Demand determines value, after all. According to Coinmarketcap.com, there are over 2,000 cryptocurrencies today. All the other digital assets bring down the value of bitcoin.

Bitcoin is indeed the biggest cryptocurrency and is, therefore, the ramp onto the market for investors as well as the ramp off. However, cryptocurrencies such as ethereum have taken market shares since ethereum became the biggest platform for Initial Coin offerings (ICOs). It, among other aspects, might have affected the price of bitcoin and brought it down to current levels.

Federal Reserve: A bearish case for bitcoin

The Federal Reserve also revealed a bearish scenario for bitcoin and said the following about assets:

“Consider now the bearish case for Bitcoin. This outlook is based on the view that Bitcoin has no fundamental value and that sooner or later the market will recognize this fact. In our view, one can accept that Bitcoin trades above its fundamental value without claiming that its fundamental value is zero. Many securities trade above what might be considered their fundamental value. Gold, for example, trades above its value as measured by its industrial applications. The U.S. dollar trades above its fundamental value in discharging U.S. tax obligations. The premium some people are willing to pay for gold and the U.S. dollar reflects the value these objects possess as exchange media.”

The cryptocurrency world remains in a discovery phase an no one knows the real value. Some believe bitcoin will be a store of value and equal to the market capitalisation of gold which currently is $7 trillion. Others argue that it is a bubble and that price would fall to zero. The federal reserve concluded that they think the price would fall somewhere in-between; “We think the future price path is more likely to remain bounded between these two extremes.” There is only one thing we know for certain, and that is that time will tell. But one thing is sure, that the blockchain and smart contracts are widely tested all around the world by many of the biggest companies.

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