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What Does Bitcoin Depict in its Future Course of Action?

This market is not stable at the moment. It is driven by flow of transactions driven by sentiments of opportunistic and fear of loosing big.

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virtual currencies, bitcoin, investors
People use a bitcoin ATM in Hong Kong. VOA

Bitcoin has been in exitance for nearly 10 years now and it has witnessed all extra ordinary ups and downs in all these years. There was a time back in 2017 when it recorded the highest ever price of $19783. Although the prices plunged back down by more than two third from its peak in response to the interference of regulators. Such swings in the prices of any currency instruments does not occur in the normal course of market.

More of that later, let us focus on understanding the concept of Bitcoin.

bitcoin-, Cryptocurrency
You cannot expect to rush into cryptocurrency trading and think you will make a huge
investment worth millions. Pixabay

What is Bitcoin?

Bitcoin is a cryptocurrency developed on the platform of blockchain technology. Its founding developer is believed to be Satoshi Nakamoto in 2009, which is known to almost all interested folks. But, Bitcoin and its peers does not operate in the form of bills or coins published or regulated by a government or bank. They are electronic assets formed and checked by a community of users who act in a decentralized way. They follow the same set of protocols as laid down by the person or persons who dreamed them up including Satoshi Nakamoto. It’s so called Bitcoin miners use the encryption technique which is depicted by the term “crypto”.

Bitcoin’s real innovation indeed was the development of Blockchain technology which is the foundation of all new crypto currencies being developed till date (except a few). Blockchain is a publicly visible and largely anonymous online ledger that accounts the calculations performed by miners to authenticate the transactions without the need for a regulating central authority. One can buy or trade bitcoin and other altcoins at any of the major cryptocurrency exchange.

 

Bitcoin
Transactions in cryptocurrencies occur the same way that you make transactions using any other fiat currency. pixabay

 

How does it Operate?

Well, as far as the price of the crypto is concerned, it is mostly driven by the demand and supply factor in the economy, just like the price of any scrip in a stock exchange is determined. However, the stock market are regulated by the regulating authorities like SEBI in India, but there is no such regulating body in operation for cryptocurrency markets yet. Although, US is in the process of making a regulating body to control the activities of cryptocurrencies and give membership to those crypto operators who abide by the rule of such body. We might see a whole lot of regulatory bodies for this segment in the coming years.

Let’s turn towards the real deal for common folks. Exactly how does a transaction occur using these cryptocurrencies. Well the answer is as simple as you already know. Transactions in cryptocurrencies occur the same way that you make transactions using any other fiat currency. There are various e-wallet service providers, in which you can keep your crypto tokens (Bitcoin in this case). The only thing is that you may need to route through a crypto exchange in order to get hold of this currency unless you are getting paid by some other user. Several crypto exchanges are in operation now a days from where you can easily buy bitcoin with credit card or choose for the USD to BTC conversion over the counter. You can pay a part of Bitcoin in order to fulfil your transactional payment just as a cent in case of a dollar. Not to mention that you can transact with Bitcoin through electronic mode only.

bitcoin
A Bitcoin logo is shown at a Bitcoin trading store, Dec. 21, 2017. VOA

That concludes the basic understanding of how this crypto operates in the real world. Bitcoin and its peers hold the potential for a revolutionary change in the operations of an economy. But this market is not stable at the moment. It is driven by flow of transactions driven by sentiments of opportunistic and fear of loosing big. For any new mode of transaction to overtake the current fiat monetary market, it must be as stable and regulated by a responsible authority. It is definitely going to take some considerable time for cryptocurrencies to get regulated. Until then, people will continue to use Bitcoin as per their potential and needs thereby making a strong case for its mass adoption.

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Know How Venezuela Can Restore Back Its Economy

A U.S.-aligned government in Caracas would likely seek to restructure its debts to creditors like China and Russia, two countries that continue to support the Maduro government. China has loaned Venezuela $20 billion in exchange for future oil shipments.

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Venezuela
A man holds a sign that reads in Spanish "They attack for oil" during a march of in support of the state-run oil company PDVSA, in Caracas, Venezuela, Jan. 31, 2019. VOA

Oil-rich Venezuela’s near economic collapse may make it easier for U.S.-backed opposition leaders to reverse socialist policies instituted by late President Hugo Chavez, if they are able to oust his successor, Nicolas Maduro, according to analysts.

“I do think at the very beginning, because the Venezuelan people have suffered so much there, they’re going to be willing to give a lot of political capital to the new leadership to do all of these changes,” said Dany Bahar, an Israeli and Venezuelan economist with the Brookings Institution in Washington.

People line up to receive bags with food subsidized by the Nicolas Maduro's government near the international bridge of Tienditas on the outskirts of Urena, Venezuela, Feb. 11, 2019.
People line up to receive bags with food subsidized by the Nicolas Maduro’s government near the international bridge of Tienditas on the outskirts of Urena, Venezuela, Feb. 11, 2019. VOA

Economic collapse

In the last five years, Venezuela’s economy has shrunk by nearly half. Nationalization of much of the private sector, including the oil industry, has driven away foreign investment. Hyperinflation, aggravated by the increasing fiscal deficit, is now close to 180 percent, with prices of goods tripling every month. More than 3 million people have fled the country to escape increasing poverty.

The government-subsidized assistance programs for the poor have been plagued by chronic food and medicine shortages, due in part to corruption and declining oil revenues that account for more than 95 percent of Venezuela’s export earnings.

Maduro has claimed the humanitarian crisis in his country is a “fabrication,” and blamed U.S. sanctions and capitalist sabotage for the economic shortfall.

The United States, as well as most of Latin America and Europe, has recognized Juan Guaido, president of Venezuela’s National Assembly, as the country’s interim leader, and support opposition claims that Maduro’s reelection last year was illegitimate after he banned most opposition parties from running.

FILE - Opposition National Assembly President Juan Guaido talks with reporters upon his arrival to the Venezuelan Central University for a conference on economic plans for reviving the country in Caracas, Venezuela, Jan. 31, 2019.
Opposition National Assembly President Juan Guaido talks with reporters upon his arrival to the Venezuelan Central University for a conference on economic plans for reviving the country in Caracas, Venezuela, Jan. 31, 2019. VOA

Market reforms

With the “Chavista” socialist model discredited, new Venezuelan leadership aligned with the United States would be expected to embrace strong market reforms that would entail an infusion of international aid and credit, privatizing state-controlled industries and cutting government subsidies.

“Market mechanisms have been completely destroyed. The government centralizes everything, decides who gets what, rations all sorts of goods, food, medication, everything. So, you have to get rid of that and just allow the market to reappear, which doesn’t really take very long if the situation on the ground is stable,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics in Washington.

Fighting inflation will likely be the top priority for any new government. Recommended fiscal controls would include introducing a new currency tied to international exchange rates, as was done by Brazil and Argentina in the past. Venezuela’s bolivar has lost most of its value, as the Maduro government reacted to inflation by printing more money while its oil revenues plummeted and its deficit grew.

“The moment you move from very high inflation to low inflation, the first thing that you see is a dramatic reduction in poverty rates. This is what happened in Argentina. This is what happened in Brazil, you know, at the time when they were fighting their own inflationary problems,” said de Bolle.

Privatizing oil industry

The International Monetary Fund would likely require Venezuela to lift price controls and privatize state-owned companies, including the oil and gas company Petróleos de Venezuela, S.A. (PDVSA), in exchange for billions of dollars in aid and loans. The reforms and influx of capital would help ease food and medicine shortages.

Venezuela has the world’s largest oil reserves, but production has fallen from three 3 million barrels per day (bpd) in 1997 to just over 1 million bpd in 2019. Maduro contributed to the decline by putting generals in charge of the company rather than industry professionals, and replacing qualified staff with thousands of political supporters.

“If we’re generous with the interpretation, they have also been doing social programs and things like that. If we’re not generous, it has become a vehicle of corruption for the regime. So, there’s going to need to be a deep restructuring of the oil company,” said Bahar.

A U.S.-aligned government in Caracas would likely seek to restructure its debts to creditors like China and Russia, two countries that continue to support the Maduro government. China has loaned Venezuela $20 billion in exchange for future oil shipments.

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Ending Venezuela’s free oil shipments of an estimated 50,000 barrels per day to Cuba, another key Maduro ally, could redirect billions of dollars to support limited social programs at home.

If Maduro is removed from office, Washington is expected to ease oil sanctions imposed this year that are estimated to cut Venezuela’s oil exports by two-thirds. Oil sales to the U.S. had provided nearly 90 percent of Venezuela’s hard currency before the sanctions were enacted. (VOA)