The complex relationship between oil trading and bitcoin is why they are susceptible to geopolitical risks and price volatility in an era of abundant supply from the U.S., Canada, and Russia. However, if you want to start bitcoin trading in only three steps, visit http://immediatesedge.de/, you will get the best liquidity, and the platform is immune to volatility risk. In contrast, bitcoin — and the blockchain technology that backs it – relies on no physical delivery infrastructure. As a result, it makes it immune to disruption by natural disasters, wars, or extreme weather events. You can visit Oil Trading for more information.
The market for bitcoins does not suffer from geopolitical risks either — which could cause increasing uncertainty in other markets in this age of global turmoil and saber rattling. The algorithm-based limit on the production of bitcoins means that there is a fixed and predictable supply that is not impacted by shifting geopolitical realities. Nevertheless, Bitcoin has had a rocky year, with prices falling from a high of $65000 to $25000 in fewer than six months.
Much of this fall is attributed to fears around bitcoin’s use in money laundering and fears surrounding the future regulation of cryptocurrencies by governments around the globe. However, whatever regulations are unlikely to impact the supply or demand for bitcoin. So while bitcoin may be volatile today, it’s hard not to see why authorities could still set it for much higher highs in 2022.
Bitcoin Supply and Demand
The supply of bitcoin is strictly capped, meaning its algorithm can always meet demand. It’s the same story with the oil demand. When the price of oil or any other commodity is volatile, smaller enterprises in the ‘merchant’ class can cash in on it through arbitrage deals. But there is no way to profit when the price of oil goes up — whether due to geopolitical instability, supply disruptions or efforts by governments to prop up the price. So it gives bitcoin an advantage over other commodities in predicting how prices will behave in the future.
Oil could be about to lose its biggest advantage over other commodities. Traditionally, supply and demand for oil have been able to be forecasted with a high level of accuracy. But geopolitics will have a much higher impact on the future of oil prices than previously thought — especially given the recent direct threats from Iran to cut off oil shipments through the Strait of Hormuz. That said, bitcoin’s ability to overcome crises and regulatory hurdles makes it a safer bet than any other commodity in this age where geopolitical risks are mounting rapidly.
How Bitcoin is Different from Oil
The Supply of Oil
In the case of oil supply, a finite amount of oil can be extracted. Due to this, the oil price has been far more stable in recent years than bitcoin — though the latter is set to become more volatile as time goes on.
However, bitcoin’s ability to withstand both disruption and volatile price swings could prove an even more profitable advantage for investors looking to bet on where bitcoin prices are headed next year. Some bitcoin investors may be able to make severe returns this way — especially if they start early enough. So if you want to invest in bitcoin but don’t want to put all your eggs in one basket, it is well worth putting aside a small amount of money each month. In addition, it might help deal with regulatory issues or other risks that might arise during geopolitical instability — and if you buy some bitcoin anyway, then this could make good sense.
The Market Cap of Oil
Oil has a much higher market cap than bitcoin and other cryptocurrencies. Oil is currently worth over $20.97 billion less than bitcoin, and the gap is always increasing. However, it’s important to remember that cryptocurrency valuations are highly volatile and, as such, are difficult to predict with any accuracy.
Another problem with market value is that it only considers the amount people pay for a commodity at the retail level. However, this can be misleading when summing up how much money people spend on something. Fundamentally, bitcoin is far more helpful than oil, making it more difficult to value. There are several ways in which a financial analyst might look at the value of bitcoin.
Among them are:
- The discounted cash flow method – This approach looks at how much money you would have made or lost by investing in bitcoin based on the amount of money spent on mining hardware and electricity.
- The fundamental method – This considers that users are holding coins. Hence, the market value of bitcoin also depends on how much people are willing to pay for it as a store of value (this level could be affected by supply and demand factors).
- The replacement cost method – This looks at how much you would have had to spend on alternative assets if you were to use instead the money you’ve invested in bitcoin.
The utility, market cap, and supply of bitcoin are the fundamental reasons why bitcoin could beat oil this year.