Those who were fans of the sitcom Seinfeld should recall the episode where Jerry and George pitch a show to a tv network. It was pitched as”a show about nothing,” What made the episode comical was that no sane person with a chance at landing their own network show would pitch a show about nothing.
I liken this to cryptocurrency, such as Bitcoin, which is an instrument that is all about nothing.
Ask yourself what is a cryptocurrency. Is it really a currency?
A currency can be described as the money or official means of payment in a country or region. It is something (e.g. coins, banknotes) that is in circulation as a medium of exchange.
So is Bitcoin, for example, a currency?
• It is not used as a medium of exchange as goods and services are not priced in cryptos. How can a shopkeeper, restaurant, plumber, etc. price in a cryptocurrency that can move double digits in a couple of days?
• It is not used for financial transactions (e.g. loans, stocks, bonds).
With that said, I would be foolish to ignore something (e.g. Bitcoin) that has increased in value by 35% since the start of the year and around 12% in the past two days.
Why is Bitcoin in demand?
This got me thinking if Bitcoin (and all cryptos) is a currency about nothing, I asked myself, why is it in demand? The answer may lie in geopolitics.
Given the current geopolitical situation, if I were someone worried about sanctions or having my assets frozen or confiscated, where would I look for a safe haven
Look at the charts below and note this headline that came out at the end of last week
US sanctions 500 Russia-linked targets ahead of Ukraine war anniversary
Bitcoin one-hour chart
A logical conclusion is that Bitcoin, the most liquid of all cryptos, would be in demand as a safe haven given the anonymity given to its owners.
It doesn’t matter what I say about it being a currency about nothing. As long as there are people willing to buy and sell it, there is a market and in the current environment, it is clear that buyers outweigh the sellers
Monthly Bitcoin Chart
While, as the chart shows, Bitcoin is performing technically, its role as a safe haven in this geopolitically charged world is likely be driving it higher more than the actual price.
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