Bitcoin has been plagued by high instability since its inception 13 years ago. The global computing power of the bitcoin network has plummeted this week as Kazakhstan has disconnected the Internet. This Central Asian republic is one of the countries with the most cryptocurrencies.
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Bitcoin is also under pressure since Wednesday’s release of the minutes of the last meeting of the Monetary Committee of the US Federal Reserve (Fed). He showed that the Fed seems to be leaning towards stronger measures to tighten its monetary policy, which has reduced investors’ desire to buy riskier assets, such as stocks.
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“Bitcoin has recently been traded as a risky asset and appears to be watching the stock decline,” Arca investor Jeff Dorman told CoinDesk.
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CEC Capital’s cryptocurrency fund (ETF) expert Laurent Kssis warned that if the Fed allowed stocks to weaken sharply, then large fund managers would automatically sell bonds to maintain a 60-to-40 stock-to-bond ratio in their portfolios. The fall in shares will increase government borrowing costs, which could trigger resale of bitcoins.
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Development of bitcoin value over the last week.
However, Dorman has allayed fears of a long-term decline in the stock and digital assets market and said they could be exaggerated. Historically, he said, markets remained resilient at a time of tightening monetary policy. According to him, the increase in interest rates in the USA is not what causes large and long-lasting sell-offs in the markets.
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By contrast, Mike McGlone of Bloomberg predicts that bitcoin and cryptocurrencies in general will benefit from the monetary tightening cycle.
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Bitcoins and other virtual currencies
There are many virtual currencies. One of the oldest and currently most popular are the so-called bitcoins. They were established in 2009, but have enjoyed greater popularity in recent years. This currency was designed so that it could not be influenced by any government or central bank.
Cyber coins are “minting” a network of computers with specialized software programmed to release new coins at a steady but declining pace. The number of coins in circulation is expected to reach 21 million in the end, which is to be around 2140.
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