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Bitcoin Analysts Study Impact as Oil Prices Grows

Bitcoin is the most popular and highly used part of the concept of virtual currency, with a market capitalization of billion dollars. You might wonder, but BTC captures approximately 65% of the entire crypto market. The increasing popularity of BTC is the primary reason why people start using other altcoins like ETH, LTC, ripple and many more. Initially, bitcoin was considered a store of value, but now its high rate of returns on investment has proved it as a financial asset.

Currently, numerous crypto experts have conducted studies to know the link between crypto and the oil market. They are also analyzing how the bitcoin collapse affects the value of crude oil. Currently, BTC is on a proof of work consensus mechanism, which means you can mine more BTC from the network. However, a massive amount of energy is required for bitcoin mining to solve complicated math problems. So, if you are planning to trade Bitcoin, you may consider knowing about The Biggest Holding In Bitcoin By Oil Companies.

According to a recent survey, the entire bitcoin network consumes approximately 2.5 GW of electric energy, equal to the amount of electricity consumed by numerous small countries like Ireland. Based on their reports, experts state that it will reach approx. 7.6 GW shortly. The primary motive of conducting this specified study is to know the budding relationship between crypto and different types of the oil market.

To know the price of transmission

A bitcoin analyst study was conducted to know the price transmission mechanism from BTC to the oil market. According to the US government, BTC and crude oil are considered commodities in which you can invest your money. However, some experts state that BTC and other cryptocurrencies are synthetic commodity money compared to ordinary commodity money.

Similar to other commodities markets, the price of both BTC and crude oil depends on the demand and supply of the market. Therefore, it is a fact that realignment in the US due to any reason can also affect the value of both bitcoin and crude oil in the market. Apart from this, other factors such as geopolitical events, US interest rates, and stock market prices can affect the price of bitcoin and crude oil.

All these factors can also affect each other. This means if an event occurs in one market, then it has a strong connection with another market. A Bitcoin analyst study was performed to understand the impact of geopolitical events, US interest rates, and stock market prices on the crude oil price because these factors can affect the value of both BTC and crude oil.

Crude oil prices

Since 2008, crude oil has recently touched the highest price in the oil market’s history, approximately 116 US dollars per barrel of crude oil. According to a report, a constant incline in the price of crude oil will increase manufacturing and transportation costs. High oil prices gave an appropriate reason to worry about the upcoming inflation because it will put massive stress on the government regarding the proper implementation of monetary policy.

In addition, the high oil price is expected to increase the production cost of goods and services, ultimately leading to higher inflation rates. On the other hand, this situation benefits consumers who spend their hard-earned money on goods and services. However, it is challenging for producers because they must manage their operations with a limited budget. Due to this condition, many analysts have started studying the impact of increasing crude oil prices in the markets.

A relevant example is DNB Markets which issued a report about the subject. The report pointed out the economic impact of high oil prices. It is predicted that due to an increase in the price of crude oil, the inflation rate could be 3-5% higher than expected in 2018. As a result, this will increase consumption as people will spend their money on goods and services. But on the other hand, this situation also gives an excellent opportunity for producers because they can increase the price of goods and services to boost their profit margin.

Conclusion

The high oil price can result in higher inflation which will ultimately cause an increase in the Central Bank’s interest rate. The increased interest rate will decrease consumption and investment spending, thus, leading to a reduction in aggregate demand. Therefore, the government should find the proper solution to solve this problem because it will hurt businesses, organizations and individuals. In addition, the Central Bank needs to implement an appropriate monetary policy to deal with this issue.

Read also: Does Rise of Bitcoin Mean Decline of Central Banks

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