Talking about the impact of the epidemic on digital currency: how digital currency can promote social collaboration and value exchange

Source: 01 Blockchain

Recently, the performance of the digital economy is relatively eye-catching. Not only has Bitcoin finally exceeded 10,000, but also many crypto digital currencies are rising. This article is an analysis of how the epidemic affects the nature of digital currency, and how to understand the long-term value of Bitcoin. Finally, we will discuss whether the digital currency policy of the central bank will be affected. Recently, the impact of the epidemic on the economy and society has become an important subject in the field of economics. I hope this article can give some market participants some calm thinking about the epidemic. Make more rational decisions.

——Liu Zhiyi First of all, let's discuss what are the influencing factors that drive the rise of universal digital currency prices? We may need to review a period of history: In July 1944 in the Brighton Forest in New Hampshire, the United States, 44 countries around the world adopted a US-led agreement that linked the US dollar to gold and other currencies to the US dollar. The British pound eventually gave way to the US dollar, which has since replaced the pound as the world's only reserve, settlement and trade currency. In 1973, the United States unilaterally announced that the US dollar was decoupled from gold, but inherited the status of the dominant currency system of the Brighton Forest System. As a result, the US dollar became the only unit of valuation of international currencies. The 2008 financial crisis made us see the cyclical and sovereignty traps of fiat dollars. Both gold and bitcoin are some kind of consensus solution. When people are disappointed with the global financial capitalism promoted by the fiat currency credit mechanism, Will choose gold or Bitcoin (digital gold) to solve the problem.

After systematic thinking, there are three practical reasons that can be analyzed, and the basic logic for you:

First, in the eyes of the public, bitcoin, as digital gold, has the ability to fight inflation. When people are pessimistic about the economy, it will lead to the growth of bitcoin's circulation and transaction data. Although the actual situation is that the price fluctuations of gold itself show that it cannot fight inflation, people's choices more show a split of consensus: in the crisis, people (mainly refers to a small number of people who have recognized and agreed on Bitcoin) (Person) did not have sufficient information about fiat currencies, so he chose Bitcoin as the method and means of stored value;

Second, the market fluctuations and the decline in transaction volume before the Spring Festival holiday are very common. With the end of the long holiday, the market has resumed operation (in the past few years, February was also a strong month for digital currencies). The determination and the promotion of the epidemic have catalyzed people's panic, and the decline in trust in traditional financial markets has not only promoted the price of bitcoin as digital gold, but also increased the price of gold. In fact, another set of data also shows this phenomenon. The global central bank has become a net buyer of gold for ten consecutive years: the global gold reserve assets increased by 650.3 tons in 2019, and the annual increase was the second highest in 50 years. The essence is that the financial crisis since 2008 has indeed challenged people's fundamental trust in fiat currencies;

Third, on the basis of understanding the above two concepts, the price of digital currency actually reflects a core issue in economic history: how credit and consensus are reached. Both gold and U.S. dollars have gained consensus credit in the market in a specific historical period (compared to a longer and more ingrained period of trust in gold), and the fact is that when these strong currencies are challenged by new entrants In this case, what may need to be done is not to avoid invisibility, but to find a way to embrace the logic of currency under the new technology and find a solution that better promotes the development of the global economy.

In short, bitcoin's rise comes from the risk-aversion sentiment promoted by the epidemic (including increasing global economic uncertainty), which has led to the split of the currency consensus and thus promoted price fluctuations. With the general rise in prices, investors in many markets have begun to wonder whether the so-called bitcoin bull market has arrived. Here I will discuss what are the necessary conditions for a so-called real bull market?

As a rational market participant, it is necessary to understand that to promote the change in the price of any currency (especially as a currency of investment products), it is necessary to increase the consensus on its general rise expectations. In other words, the external mitigation is an epidemic. With the rise of global risk aversion, the decline in risk appetite will also drive people to find investment products. However, this rise is not continuous but cyclical fluctuations. To promote its entry into the so-called bull market, the following three conditions must be met:

(1) Promote Bitcoin to become the consensus target of a more general population, with investment properties consistent with gold. What you need to know is that gold condenses the consensus and credit of metal currencies for thousands of years, while Bitcoin currently only has very The consensus of people in the small circle, and it needs the support of computing power and electricity;

(2) Promote the application of Bitcoin in more sovereign countries. The target of investment attributes needs to be supported by actual economic scenarios. Considering the increasing uncertainty of the global economic cycle, although it has not reached the economist "Doctor Doom" Nouriel · Roubini has predicted the collapse situation, but the general lack of confidence is a fait accompli. In this case, the promotion of the more "fair" bitcoin may be a good solution;

(3) Promote the universal application of bitcoin in the digital economy field, especially in the field of cross-border services; bitcoin comes from the digital world after all, and its application scenarios should also focus on the digital field, so find its killer Scenario, expanding its circulation efficiency in different scenarios is the key.

On the basis of the above three conditions, it is possible to promote the gradual formation of bitcoin from a niche to the general public, from individual cognition to general consensus. It is impossible to promote the risk aversion mood stimulated solely by the accidental changes of external conditions. A persistent bull market will only result in unsatisfactory results. Therefore, to persuade investors to take a more rational view of the impact of cyclical volatility on investment targets, and to think about whether the real driving force for Bitcoin's long-term rise is in place?

Finally, let's discuss whether the digital currency policy of the central bank will be affected to some extent? To answer this question, we must first look at the impact of the epidemic on the RMB exchange rate. From the perspective of the performance of the RMB exchange rate during the epidemic, China implemented a single, managed floating exchange rate system based on market supply and demand during the SARS epidemic. The exchange rate has always remained near 8.28. The current system of floating exchange rates in China, which is based on market supply and demand, adjusted with reference to a basket of currencies, has greater flexibility in the marketization of the RMB exchange rate. Therefore, the RMB exchange rate brought by this outbreak The volatility will be higher than the SARS epidemic.

In other words, there are two kinds of impacts on the impact of the new crown epidemic on foreign capital. On the one hand, due to short-term risk aversion, some foreign capital has flowed out of the domestic market, resulting in short-term or devaluation pressure on the RMB exchange rate. The fall in the price of risky assets in the future will also increase its attractiveness. Therefore, there is an impact of inflow of foreign capital from the perspective of risk and return, which results in certain support for the RMB exchange rate. In other words, we can expect three results:

1. The epidemic has promoted the fluctuation of the RMB exchange rate, and will also promote the central bank to promote digital currency technical solutions to better manage the exchange rate of the RMB. The current risk caused by the epidemic is that it will periodically affect market sentiment, making the exchange rate phased. While under pressure, it also challenges people's expectations for the future economy. Considering the basic environment of external Sino-US trade, it can be seen that the central bank will face a more complicated market environment and need to better manage the exchange rate;

2. Considering that as the prevention and control of the new coronavirus pneumonia epidemic enters a critical stage, the issue of whether the public's concern about the safety of using cash payments can be alleviated through digital currencies, and more people tend to use non-contact electronics at special times. Means of payment, which will promote the issuance and use of digital currency. At present, the epidemic has given the central bank an opportunity to promote comprehensive paperless currency. Looking at paperless currency for a long period of time can also help the central bank to better manage social credit and establish currency. Rules of circulation

3. In the long run, central banks of all countries are concerned about how legally encrypted digital currencies can promote social collaboration and value exchange, and whether such new technological forms can promote the faster and better operation of national economies. Therefore, it is important to understand that digital currency policies of central banks cannot Understand only in the short term, but from the perspective of how digital currencies can better serve the economy. On the one hand, we can see that the central bank is cautious in treating digital currencies. The new technology will not only bring benefits but also bring risks to the financial system. On the other hand, you can also see the opportunities for RMB internationalization. And various social inputs, further occupying the global commanding heights of sovereign "digital currency" technology. Based on the mature technology, relying on the existing RMB payment clearing network and channels, DCEP international payment clearing is carried out. We should see the opportunities inherent in the crisis. The internationalization of DCEP is an extension of the domestic monetary system to foreign countries. The improvement of the domestic monetary system is the foundation and guarantee for the internationalization of the RMB and DCEP.

The above is my reflection on the rise in the price of digital currencies represented by Bitcoin. The core of its logic lies in understanding the nature of currency is to promote social collaboration (division of labor) and value exchange (transactions). On this basis, understand the technology brings Changes in finance, society, and the economy can really see the logic of value evolution in addition to price fluctuations. Currency reflects only changes in people's expectations of the economic system it represents, and more fundamentally changes in confidence in the economic system it represents. How to promote consensus and information does not only need to understand the benefits brought by digital currency What needs to be understood is how to promote the formation of consensus in complex economic systems. Finally, we discuss the impact of the central bank's monetary policy. Its core point is to help you understand that the digital currency policy of the central bank will not be affected only by a certain investment target, but will be based on the healthy operation and development of the economic system. core.

In summary, the epidemic brought challenges and opportunities to the global economic system: The challenge is that the risk aversion sent by the epidemic actually reflects people's trust and recognition of the current economic system under global financial capitalism. Decline, and the opportunity lies in the possibility that new technologies and governance systems will bring a new pattern to the original global currency ecology, and we hope that China will not miss this opportunity, and we believe that the central bank can promote the legal digital currency represented by DCEP. Based on the economic system, a more robust economic ecology is constructed. For investors, instead of believing in the so-called bull market, it is more reliable to believe that the nature of the market economy lies in the division of social collaboration and value exchange.