Here is Why Bitcoin (BTC) Will not Bleed to Death

The problem with Bitcoin is that it cannot be regulated. Further it is claimed to be used more by criminals.  It is considered to be an important tool, which helps citizens circumvent capital controls.

So, what is capital control? Capital control represents any measure taken by a government, central bank, or other regulatory body to limit the flow of foreign capital in and out of the domestic economy. These controls include but is not limited to taxes, tariffs, legislation, volume restrictions, and market-based forces.

Citizens who are subject to capital control will not be able to buy foreign assets. Similarly, foreigners will not be able to buy domestic assets.  Thus, capital control works two ways – domestics citizens will not be able to buy foreign assets (capital outflow control) and foreign citizens will not be able to buy domestic assets (capital inflow control).

Countries impose capital control to reduce volatility of currency, thus providing stability against sharp fluctuations. When there are major disturbances in capital outflows (no demand for transactions in domestic currency) this can lead to rapid depreciation.

Practically capital controls take two main forms: 1.  Direct or administrative controls.  2.  Indirect or market-based controls.

Capital controls on Bitcoin and Altcoins is slowly trying to take effect by making it official, legal, and quasi-legal transaction instrument in countries like El Salvador.  Further in the name of regulation it can come in several forms like taxes on cross-border flows, unremunerated reserve requirements (So-far – the power of the BTC network is the backing), investment caps, minimum stay requirements, multiple exchange rate system (already seems to exist and therefore the concept of slippage), credit regulations, and outright prohibitions (China).

The nations who do not want Bitcoin or Cryptocurrency to become a practical capital have deployed capital controls and such nations are called “protectionist”. India is the only country – other than China – which already has complex and elaborate legal and regulatory framework of capital controls along with an extensive array of restrictions on capital account transactions.

The major benefit of capital controls is that it can prevents overheating in BTC and cryptocurrency economies. This means it can help prevent investors from pumping and dumping an economy. Investors cannot “flood the economy with funds” “drive up output and prices” and then suddenly leave causing everything to crash.

To prevent crash there should be lot of holders, which BTC already seem to have.  To prevent volatility there needs to be some real time transaction happening with a substantial portion of Bitcoin – outflow from wallets to the ecosystem – this does not seem to be happening – So, the volatility thing for BTC and cryptos is going to be in place.  And the volatility is from where profits come for investors.

The capital control of preventing outflow (BTC Holders) preventing Inflow (Scarcity) seems to already be there in the decentralized machinery of Bitcoin. Probably, Bitcoin will not bleed to death.