The world is waiting for Joe Biden's inauguration tomorrow after four years of Trump in office. Meanwhile, the USD decline on Tuesday has attracted massive attention. U.S. Secretary of the Treasury nominee Janet Yellen plans to make a statement regarding a traditional commitment to the currency rates during her testimony. Investors are waiting to hear her ideas about foreign exchange policy and taxes.
Against major currencies, USD experienced 2% losses at the beginning of 2021. Some investors expect it to go down even further after the newly elected President Joe Biden proposed an aid package of $1.9 trillion in response to the coronavirus crisis.
The decline of USD and a spike in Bitcoin price has fueled an intense debate. Experts keep questioning whether Bitcoin is a bubble or carries an intrinsic value. A bubble would mean Bitcoin exceeds its actual value, but the latter is yet to be defined. Bitcoin's future on the market is unclear.
Since Bitcoin is a young technology, it isn't easy to understand its fundamental value. There certainly is a high demand for this developing asset. Because of this, it is characterized by unpredictability, which makes guessing its future valuation methods speculative.
The printed global supply of USD has dramatically increased in response to the pandemic. Recovering from the potential recession and inflation related to the increase will not be easy to manage. Some analysts argue that bitcoin's real value could be its balancing factor to an increasingly chaotic economic situation.
Some experts believe that bitcoin is the opposite of the bubble. Alternatives like bitcoin could even be more attractive when other bubbles might be getting close to bursting, as tech companies continue to depend on low-interest rates. It could also explain why bitcoin's price is on the rise.
Needless to say, it doesn't guarantee Bitcoin's ongoing success. It might fall and do so at a fairly rapid rate. However, it should not drive us to label bitcoin as a bubble until we can better understand its price's correlation to the fundamental value.