In a recent article, the Federal Reserve Bank of St. Louis has reportedly predicted the future of Bitcoin. The authors David Andolfatto and Andrew Spewak stated that the lower price of Bitcoin can be linked to the ever-growing supply of the altcoins.
According to the article, there might be three possible predictions for the Bitcoin’s price. It could be zero, indefinite, infinite appreciation or anywhere between it.
In essence, Bitcoin has a volatile and speculative nature. Moreover, a limited supply does not necessarily mean that the value would keep on increasing forever. The value is indeed linked to the demand. Many new coins, having attractive attributes for the market, are being launched on a daily basis. Given the case that Bitcoin was the only cryptocurrency, all money would have flown into it. However, it happened only for a brief time in the history of the cryptocurrencies.
On the other hand, Bitcoin maximalists have maintained that Bitcoin has the ability to overcome all the improvements made by altcoins. Nevertheless, according to the Federal Reserve economists, this is not a reality. Apart from the supply and demand issues, there are other complex factors too that govern the price of Bitcoin.
The super liquidity of Bitcoin makes it on-ramp and off-ramp for other currencies. At the moment, Ethereum has been used for the ICOs purpose instead of Bitcoin. It is important to note that Ethereum has a large supply. Therefore, its lower price is justified. This is a clear example of how altcoins may affect Bitcoin.
In the future, it is expected that people will adapt to the blockchain technology via banking applications. Along with that, other decentralized applications may also get public approval. This situation would further enhance the demand for tokens like Ethereum, NEO, TRON or Aelf, which support such blockchains. Hence, Bitcoin might be lagging behind altcoins in such a case.
However, the Federal Reserve economists still believe that the price will not touch zero. An important factor to take into account is that one aspect of Bitcoin’s value, its utility. As other coins develop more functionalities, Bitcoin’s future might be in danger.
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