Markets Could be Influenced by Bitcoin Volatility
Usually Bitcoin gains several thousand dollars of its value with doubledigit percentage moves. According to Jordan Rochester, who is a Forex strategist, there is a risk that bitcoin volatility may start to affect other markets.
Rochester predicted on Monday’s view the digital gold would have a growing influence on energy markets, especially coal.
Uncovering new bitcoins for use, a process known as mining, requires a lot of electricity. And China, the world’s largest coal producer and consumer, hosts about 71 per cent of the cryptocurrency’s mining pools, Rochester said.
“Estimates were made in March 2016 expecting Bitcoin’s energy consumption to match that of Denmark by 2020,” Rochester said.
“Today bitcoin already has matched that, three years ahead of schedule. So if it’s not risk-off inspired price action from bitcoin that moves other markets how about higher energy costs?”
The main fact that causes spending energy for mining bitcoin, is that it’s a proof-of-work cryptocurrency. This means miners use mathematical algoritms on the blockchain platform to protect the network from attacks. It requires more energy, since calculations get harder.
“For as long as POW is the most common form of cryptocurrency, this could start to have an economic and environmental cost,” said Rochester, who informed about being interested in bitcoin and ethereum.
The other asset classes are already affected by Bitcoin, which has a market valuation of $300 billion. For example, the chip- making companies like Nivida and AMD have been supported by demand for their products to mine bitcoin. Moreover, some stocks have raised after announcement by their companies to add blockhain technology.