Fxwirepro: Is Bitcoin Volatility Good for Hedging? What Does 2017 Mean for Btc/usd?

Well, before getting into core forecast, wish you all the best to begin with 2017, the low volatility for bitcoin has reasonably been foreseen in this new year (possibly a couple of hiccups every now and then), but a sturdy stride of bullish momentum in its progress, broader industry use cases and applications for bitcoin, and the adoption of Segregated Witness to handle scaling.

The more volatile an asset, the more people will want to limit their exposure to it, either by simply not holding it or by hedging. Volatility also increases the cost of hedging, which is a major contributor to the price of merchant services. If Bitcoin volatility decreases, the cost of converting into and out of Bitcoin will decrease as well.

Bitcoin volatility is majorly driven by unpredictable perceptions of the intrinsic value of the cryptocurrency as a store of value and method of value transfer. Bitcoin’s volatility at the present makes it a somewhat unclear store of value, but it promises nearly frictionless value transfer. Since these two drivers of the current spot rates of BTC vary against the dollar and other fiat currencies.

Many financial institutions banking & NBFCs, have been setting up a blockchain-based identity platform and we’re super thrilled about the prospects of using a public ledger for global identity management.

To a certain extent, Bitcoin volatility is also driven by holders of large proportions of the total outstanding float of the currency. For Bitcoin investors with current holdings above around $10M, it is not clear how they would liquidate their position.

Predominant thing to be noted and most likely appearances are the government sponsorship or endorsement of bitcoin-related companies and more likely, government-led buying of bitcoins or investment into bitcoin mining companies or similar.

Potential government crackdowns on bitcoin in certain countries, due to capital flight or loss of exchange controls could be seen as well. But, this will drive up the bitcoin price in the black markets in those economies.

We presume a faster pace and exponential times price growth overall in 2017 for the BTCUSD pair.

This may result in bitcoin prices in other currencies being up 4 to 7 times, but we reckon it’s quite fair to ponder over that BTCUSD pairing is what we should use as the benchmark.

While these are all exciting developments, there are some events that are unlikely to occur. Parabolic growth (20 times gains) seems highly unlikely, ie: bitcoin at $6,000-$8000 is most probably not going to happen in 2017. The exceptional cases are also not convincing; given what happened with ethereum (this is a 5% chance of happening). But when G7 currencies such as GBP, EUR and USD are clouded by risky events of geopolitics and macroeconomics, the idea of global currency system may upbeat the expectations of foreign traders.

What’s been in the trail is that the “Consumer Adoption’, and idea of the mass adoption of bitcoin as a currency of any sort by average consumers is not to be trustworthy. But yes, on the contrary to this stance we would still contend that bitcoin is a commodity today, not a currency. That will change in time as the time progresses and blockchain is gradually going to block the trade blocs in major sectors of business.

Hence, we suggest foreign traders who foresee the risk of FX exposures in above-mentioned currencies in 2017, BTC could also come into rescue.  

The material has been provided by InstaForex Company – www.instaforex.com

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