Bitcoin Stuck in a ‘Paradox of Thrift’

Bitcoin Paradox

Bitcoin is a deflationary asset, i.e. with time the number of new Bitcoins released would decrease. Hence, it is only expected that due to the limited amount the purchasing power of Bitcoin would increase.

However, at this moment in history Bitcoin’s demand depends only on its return in price. Hence, an ideal deal would be to buy Bitcoin at the cheapest price and sell at the peak.

However, with a number of traders looking for the same opportunity, the Bitcoin market seems to be stuck in a ‘Paradox of Thrift.’

According to the theory by John Maynard Keynes, during an economic crisis, people try to save more. Hence, by doing that, the economic system which is already running short of money becomes even further deprived.

A similar analogy can be made with the current cryptocurrency markets. In sentimental terms, the cryptocurrency market is going through a tough phase. However, instead of buying the asset at a lower price. The people have taken to calling for bottoms. Hence, in a drive to save their last penny the market participants are looking for the best deal.

This creates a paradoxical situation for the market. The cryptocurrency markets which was thriving on investments from throughout the world have started to fall apart since the beginning of 2019.

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Bitcoin Stuck in a 'Paradox of Thrift'
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Bitcoin Stuck in a 'Paradox of Thrift'
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Bitcoin is a deflationary asset, i.e. with time the number of new Bitcoins released would decrease. Hence, it is only expected that due to the limited amount the purchasing power of Bitcoin would increase.
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