Global central banks are aggressively pumping money into the market. Is it time to buy Bitcoin?

Recently, a foreign media wrote a column saying that the global financial crisis is approaching, and it is time to buy Bitcoin! Bitcoin has started a round of crazy rise. In the past year, Bitcoin has performed very well, surpassing the performance of most other assets. Bitcoin is the only asset that outperformed gold and silver in 2016. Why is Bitcoin experiencing such a big rise?

Figure: Bitcoin price trend from 2011 to 2016

Investors are looking for alternative assets as confidence in traditional assets is waning. Both the stock and commodity markets have been on a rollercoaster ride since the start of the year, but investors have been unable to accurately grasp the bull-bear transitions in the market. Smart investors are lacking confidence in the global macroeconomic situation, the most notable example being the legendary George Soros returning to the market to short what he believes is an overextended market. Similarly, other hedge fund managers have also begun to hoard gold. This further supports our view that the next financial crisis is about to break out.

The UK's referendum decision to leave the European Union has raised the possibility of further easing by major central banks around the world. The Bank of England is likely to launch easing measures at its next meeting, followed by the European Central Bank and the Federal Reserve. After his election victory, Japanese Prime Minister Shinzo Abe may push the Bank of Japan for a new round of "easing" plans. Central banks have injected a large amount of liquidity into the financial system since the last financial crisis, and are still injecting it at a rapid pace. However, the world is getting closer and closer to an unprecedented financial crisis.

Figure: The balance sheet of the European Central Bank, the Federal Reserve, and the Bank of Japan, as well as the economic growth trend of the G20 group from 2004 to 2016. The Fed's crazy money printing policy made commodity guru Jim Rogers sigh, "The Fed's money printing plan will make trees on American land extinct." However, Bitcoin's approach is the opposite of the central bank: Unlike traditional currencies, the number of Bitcoins is capped at 21 million, and there will be no additional Bitcoins after that. Bitcoin mining will become more difficult in the future, and successful miners will receive fewer Bitcoins. In the program designed by Satoshi Nakamoto, the Bitcoin rewards in the 210,000 mining areas will be halved one by one. At the beginning, the Bitcoin reward for each mining area was 50 Bitcoins. At the end of 2012, this number was halved to 25 Bitcoins per mining area. Last week, the second round of halving occurred, and each mining area currently has only 12.5 Bitcoins. Central banks of various countries have implemented a policy of flooding the market with money, while Bitcoin is constantly tightening its supply, which has led to its price increase this year. Some Bitcoin miners have found that it is becoming increasingly difficult to continue mining as the number of Bitcoins continues to halve. BTCC CEO Bobby Lee said, "The number of Bitcoins left in the mining area has been greatly reduced because people have already discovered 75% of Bitcoins. In the current world of asset expansion and paper money flying around, people naturally understand the value of a limited number of assets. Bitcoin is a very good choice to keep their assets." Recently, I watched a speech about Bitcoin and other electronic currencies. The speech introduced how Bitcoin has changed the world and the financial system, and this is just the tip of the iceberg. The speech very logically explained why Bitcoin and other electronic currencies are very important to individuals. Bitcoin's volatility has dropped significantly in the past period of time, and Bitcoin has become the asset with the lowest linear volatility since its birth. The scope of Bitcoin's use is becoming more and more extensive and easier. I suggest that investors pay attention to Bitcoin and other virtual currencies while paying attention to gold and silver. In fact, virtual currency assets have become part of their investment portfolio. Why? Because I believe that people will slowly begin to regard virtual currencies as a safe haven. In addition, the use of virtual currencies is becoming easier and easier. People can pay anytime and anywhere through their mobile phones, no matter where you are, and there will be no handling fees. In addition, many transactions will not be traceable. Sir John Templeton, founder of the legendary mutual fund company Templeton Group, once said, "Diversification is the safest way to invest."