Rather than focusing on supply and demand or the value of technology creativity made by Bitcoin and blockchain that delivered to the society, Bitcoin Strategy predicts the trends of Bitcoin from much macro and fundamental perspectives. The main factor governs the trends is politics on monetary system, both domestic and global. Geopolitical power struggle between the superpowers, namely US and China, is a predominant factor.
Unless we have a right strategy to predict the trends of Bitcoin, we can figure out the right tactics to invest in Bitcoin.
Crypto-activist supports Bitcoin, mainly because of its decentralization features that bring lots of advantages over traditional monetary system. Most important of all, no one can steal your money away as long as you keep it safe in your wallet. Your Bitcoin wouldn't be inflated by government's continuous money printing. In contrast, the value of Bitcoin would be getting higher and higher owing to its limited supply.
Generally speaking, currency functions as a medium of exchange, unit of account and store of value. Bitcoin and some major crypto-currencies own all those characteristics of a currency. Even though they are not categorized as real currencies, they bear some kinds of functions of currencies and, actually, are gradually used or treated as currencies.
Monetary authority, namely central bank, of a government always has monopoly power over currency. Bitcoin, being the most prestigious and most accepted crypto-currency worldwide, is under worldwide monetary authorities’ full political scrutiny and manipulation. Therefore, worldwide politics and policies play determinative roles on the trends of Bitcoin price.
Henry Kissinger once quoted: ‘Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world.’ Money is power. The power of money is limitless. Big money is big politics. Undoubtedly, Bitcoin has been closely interconnecting with politics ever since it was created.
Due to tremendous gains, in terms of seigniorage revenues and inflation tax, currency issuance is the main source of income of a country. By regulating or manipulation of currency policy, the government not only controls financial and economic sectors, but also manages wide-range of human activities of the societies, both domestic and international, depending on the strength and influence of its currency.
On the contrary, the weakening of currency sovereignty may diminish a government’s control on domestic issues and influence on international matters. In extreme cases, once currency sovereignty is sacrificed, financial and social stability can be undermined, causing social unrest and even disastrous impact on societies, as seen from Asia countries during Asian Financial Crisis happened in 1997.
It's zero sum game relationship between fiat currency and crypto-currencies. Normally, a capable government of sovereign country would not allow Bitcoin or other crypto-currencies to erode its monetary system. Measures would be taken to enforce the indispensable status of official fiat currency so as to strengthen currency sovereignty.
China is a good example. Bitcoin and other crypto-currencies had brought tremendous values to China and the Chinese people. Firstly, blockchain technology and its application system were introduced into China which promoted technology advancement. Secondly, various crypto-currencies related industries, such as crypto-currencies financing services, manufacture of mining machine, chipset and peripheral, and so on, were established and became industry giants, for example, BTC China, Bitmain and etc… Last but not least, the Chinese people made a handful of wealth from trading Bitcoin as China was once the largest crypto-currency market of the world.
Even though there were huge vested interests and benefits, a complete ban on Bitcoin and other crypto-currencies could not be avoided. ICO was first banned in Sept 2017; closure of exchanges and punishment on making transaction of any kinds followed; finally, even Bitcoin mining was forbidden. Laterally, all crypto-currencies related activities were not allowed. In response to ever toughest regulations, the price on Bitcoin once slumped as much as 45 percent.
Of course, you would hear more about illegal fundraising, tax evasion, dark-web marketplace and etc... Diagram on the right showed the headline of an editorial article about negative aspects of Bitcoin published on China Daily, during the Chinese government imposing total ban on Bitcoin in Sept. 2017.
However, the Chinese government has not buried the truth that currency sovereignty is really the matter. Senior Chinese officials had urged to grab tighter control over currency sovereignty in mass media, in both explicitly and implicitly ways. The subtext was quite clear that Bitcoin had already posed substantial threat to Renminbi.
Please be noted that the banning of ICO and crypto-currencies would not affect the development of blockchain technology and digital currency in China. As we can see, the investment in blockchain is still on the upsurge in China after the ban. Enterprises continue to apply the technology widely in their products or services to increase productivity and competitiveness. On the other hand, the People's Bank of China is actively preparing for official digital fiat currency, a digital form of sovereign currency backed by Chinese government. It is foreseeable that the development of blockchain technology and digital currency in China would outpace most parts of the world as the country has strategically planned, organized and invested in it in the very early stage.
To conclude, one should not have doubt on whether a government would intervene in crypto-currencies or not, once currency sovereignty is found to be endangered. It is a matter of how, leaving leadership of a country to decide whether outlawing or manipulating is more appropriate to deal with.
Coming back to the focal point, people are interested in knowing if the development of crypto-currencies would pose threats to the Federal Reserve's monopoly authority in currency, and the US government (or the Wall Street) would give up their control over currency monopoly or take similar measures as China did to crackdown. The US government’s stance has enormous impacts on the price trends of Bitcoin and other crypto-currencies which is directly linked to your wealth and happiness.
Bitcoin Strategy provides a comprehensive framework of knowledge to answer these questions and much more...
Political Power Structure in the US
The Dollar, Monetary & US Hegemony
Defusing challenges on currency hegemony
The owner of the Bitcoin project
The Rising of Bitcoin
Inequality in Monetary System
Financial Implications of Bitcoin
Bitcoin Trends before the Coming Financial Crisis