St. Louis Federal Reserve Predicts ‘Flood’ of Altcoins Will Drive Down BTC Prices

January 15, 2019
50 Views

The St. Louis branch of the Federal Reserve bank has published a report seeking to examine the long-term prospects of BTC as an investment. The paper is highly critical of bullish outlooks for bitcoin, asserting that a “flood” of altcoins will deflate the price of all cryptocurrencies relative to fiat currencies over time.

Also Read: Marshall Islands Updates 2019 Roadmap for Sovereign Cryptocurrency

Economic Research Arm of St. Louis Federal Reserve Assesses Bitcoin’s Prospects

The St. Louis Federal Reserve has published a paper that seeks to assess the prospects of bitcoin as a long-term investment.

According to the paper, the bullish argument for bitcoin core is that it will appreciate “indefinitely” due to its “capped supply and an ever-growing demand.” The bearish case for bitcoin, the St. Louis fed asserts, is that “Bitcoin’s price will fall to zero, as it’s an intrinsically worthless asset.”

Ultimately, the paper predicts that the future price action for bitcoin is likely to remain bounded between the aforementioned “extremes.”

St. Louis Fed Argues ‘Ever-Expanding’ Altcoin Supply Will Diminish Bitcoin Prices

The St. Louis Federal Reserve describes the bitcoin bull scenario as “too optimistic,” emphasizing the expectation that the “ever-expanding supply of alternative cryptocurrencies” will drive down the price of BTC relative to fiat currencies.

The paper asserts that the bullish outlook for bitcoin “assumes that the nominal exchange rate between bitcoin vis-a-vis other cryptocurrencies will adjust in proportion to their relative supplies,” adding that “Bitcoin is expected to appreciate relative to its competitors or, equivalently, its market capitalization share will stay constant over time.”

St. Louis Federal Reserve Claims Bitcoin ‘Has No Fundamental Value’

The bearish outlook is predicated on the assertion that “Bitcoin has no fundamental value” and that the market will “recognize this fact” sooner or later.

While appearing to make concessions for the possibility that bitcoin will not crash down to zero, the paper notes that “one can accept that bitcoin trades above its fundamental value without claiming that its fundamental value is zero,” adding that “many securities trade above what might be considered their fundamental value.”

In concluding, the paper asserts that the price dynamic of an unbacked asset will likely produce significant volatility and is “inherently unforecastable.” While the St. Louis Federal Reserves adds that the price of bitcoin is “not likely” to fall to zero, the paper repeatedly emphasizes the authors’ expectation that the proliferation of altcoins “is likely to place significant downward pressure on the purchasing power of all cryptocurrencies, including bitcoin.”

What is your response to the St. Louis Federal Reserve’s predictions regarding the long-term outlook for bitcoin? Share your thoughts in the comments section below!


Images courtesy of Shutterstock, Wikipedia


At Bitcoin.com there’s a bunch of free helpful services. For instance, have you seen our Tools page? You can even lookup the exchange rate for a transaction in the past. Or calculate the value of your current holdings. Or create a paper wallet. And much more.

The post St. Louis Federal Reserve Predicts ‘Flood’ of Altcoins Will Drive Down BTC Prices appeared first on Bitcoin News.

https://news.bitcoin.com/st-louis-federal-reserve-predicts-flood-of-altcoins-will-drive-down-btc-prices/

You may be interested

In First, FinCEN Penalizes Bitcoin Trader for Violating AML Laws
Crime
10 views
Crime
10 views

In First, FinCEN Penalizes Bitcoin Trader for Violating AML Laws

btcethereumadmin - April 19, 2019

The Financial Crimes Enforcement Network (FinCEN) has for the first time penalized what it dubs a “peer-to-peer cryptocurrency exchanger” for…

South Korean Crypto Exchange Coinnest Announces Closure
Crypto News
12 views
Crypto News
12 views

South Korean Crypto Exchange Coinnest Announces Closure

btcethereumadmin - April 19, 2019

Cryptocurrency exchange Coinnest, once South Korea’s third largest, is closing down. The exchange posted a notice on its website saying that…

SBI Holdings: Bitcoin Cash Removal Amid Bitcoin SV Delistings Was Coincidence
Bitcoin
16 views
Bitcoin
16 views

SBI Holdings: Bitcoin Cash Removal Amid Bitcoin SV Delistings Was Coincidence

btcethereumadmin - April 19, 2019

In a statement to Cointelegraph, the finance giant said its move to stop supporting BCH had been pre-planned. Japanese financial…

Leave a Comment

Your email address will not be published.