Editor's Note: This article comes fromMengyan Finance (ID: Meng-eyes), reprinted by Odaily with authorization.
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Editor's Note: This article comes fromMengyan Finance (ID: Meng-eyes)Mengyan Finance (ID: Meng-eyes), reprinted by Odaily with authorization.
1) Bitcoin has become a popular risk-off topic, reaching a record high in the last quarter of 2020.
2) Is there any reason to call Bitcoin "digital oil"?3) Oil is probably the top commodity when it comes to the real economy, while Bitcoin appears to be very out of touch.The outbreak of the novel coronavirus in early 2020 had ripple effects around the world, completely changing many financial forecasts. For the first time since the closely watched Wall Street financial crisis of 2008, investors around the world are trying to insulate themselves from a foreseeable recession.
While investors turned to traditional assets such as gold and oil as a safe haven for investment, Bitcoin has become a popular safe-haven topic, reaching a record high in the last quarter of 2020.
Digitization and the Rise of “Digital Petroleum”As health researchers seek to end the pandemic and restore some kind of normalcy across the globe, one thing we can now be sure of is that digitization is inevitable at every level. Under the restrictions of the global blockade, many digital assets, online jobs, payment merchants and online stores have achieved tremendous development.Unsurprisingly, this trend has also sparked a new boom in finance. Many investors have begun to shift their attention from traditional safe-haven assets such as gold and oil to digital assets. Bitcoin and other cryptocurrencies are also now seeing more institutional investor inflows than ever before.Calling bitcoin “digital gold” and emphasizing it as a store of value is common in this cycle compared to the 2017 bull run. But is there any reason to call it "digital oil"?
'Digital Oil' and Crude Oil in 2020
After suffering a significant loss in value during the second week of March 2020, bitcoin rallied to become one of the best performing assets of the year. On the other hand, the demand for crude oil has been hit hard by the epidemic blockade restrictions and automobile restrictions.In April 2020, Brent oil prices fell to an average of $18 a barrel, the lowest monthly average since February 1999. Overall, bitcoin ended the year up 318% in price, while WTI was down 22% at the end of the year.Arguably, oil is probably the top commodity when it comes to the real economy, while Bitcoin appears to be very out of touch. When asked if there was a way to compare them as assets, CFA Thomas Kuhn told BeInCrypto: "Bitcoin plays a role like oil, and the beauty of it really is that it's a foundational asset, it's the entry into the digital asset industry. It provides liquidity and is the base layer for all other related values.”While gold has had a good year, hitting the elusive $2,000 mark and making new all-time highs, oil has had a relatively flat year for the year, especially as investors seek a hedge against a recession.What will happen to these two assets in 2021?Uncertainty amid the global coronavirus pandemic has taken its toll on economies, with the dollar falling to its lowest level in three years late last year. It is foreseeable that the global economy and fiat currencies will become weaker in the long run, and they have been doing badly for some time.Heading into 2021, investors are likely to continue to protect their money, and a big talking point throughout the year will be traditional safe havens like crude oil, or "digital oil."On the one hand, oil is gradually recovering from a year-long slump and is likely on the path to full global demand. Long-term believers will argue that crude oil never fails and that its intrinsic value is driven by worldwide demand.In a dramatic turn of events, however, Tesla stock rose 695%, making it one of the world's most valuable companies and giving people a glimpse of a bright future for electric vehicles. Oil demand will fall back sooner or later, and the recovery may only be a fairy tale.For cryptocurrencies, the 2020 post-halving bull run is already very similar to 2017. Unlike 2017, Bitcoin and other cryptocurrencies have enjoyed a healthier reception from institutional investors and hedge fund managers; trust in the mainstream media and the public has also improved significantly over the past few months.Some will still bring up issues such as the intrinsic value and extreme volatility of cryptocurrencies to disparage the asset. However, Bitcoin has every incentive to outperform every asset, as it has done over the past decade.“Oil’s strategic reserve provides stability to its price while also positioning it as a geopolitical asset rather than a ‘normal’ commodity. On an economic-strategic level, oil is much like a currency,” Kuhn commented, adding : "Bitcoin is not unreasonable as a kind of 'digital oil' for the new financial system. From the perspective of digital assets, Ethereum and other similar platform tokens are relatively close, but they only lubricate the decentralized The wheel of the mechanism, rather than like Bitcoin, it acts more like a foundation, first of all, the concept of the entire industry, and second, the foundation of storing value. I think it is more fundamental.”However, outside of digital assets, if viewed from the perspective of traditional portfolio management, Kuhn believes that this point will be a stronger comparison. “What bitcoin is to digital assets, oil is to industrial assets. The markets themselves are similar, oil and bitcoin trading are very similar assets,” he said.Oil is very sensitive geopolitically and macroeconomically. In 2020, we saw Bitcoin take a hit for the first time because of the impact of the broader market due to COVID-19. When it comes to whether bitcoin and oil will converge, or just the two sides responding to the broader market, Kuhn noted that the following questions need to be addressed:1) When will risk appetite turn into risk aversion?
