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After the Bitcoin ecosystem, benchmarked by Bitcoin, went through various scandals and turbulence, it's easy for people to associate Bitcoin with decline. However, whether it's the controversy surrounding the Binance exchange or the decline of its competitor FTX, none have put an end to the fame of the digital asset introduced by the mysterious Satoshi Nakamoto in 2008. After dropping to less than $16,000 a year ago, the price of Bitcoin is now approaching $44,000. The historical peak reached in November 2021, around $69,000, is still vivid.
Experts are willing to point out that the continuation of Bitcoin is due to technical reasons. While Bitcoin benefits from a trust environment, it doesn't rely on trust to survive. As long as Bitcoin's blockchain— the independent technology supporting Bitcoin's existence— operates normally, and there is no reason to believe the blockchain will be destroyed or damaged, Bitcoin can continue to trade. FTX and Binance exchanges play facilitating roles; they might weaken Bitcoin through their activities but are unlikely to destroy it.
The price of Bitcoin depends on a series of external economic factors. During periods of crisis, inflation, or rising interest rates, such as in the past two years, its instability and related risks are not attractive. Instead, it becomes a speculative tool when cash flow is abundant. Hence, it gained popularity during the COVID-19 pandemic and the era of financial easing from 2020 to 2021.
The current period doesn't align with these criteria. The current surge in Bitcoin is primarily based on an unwavering belief that the appreciation of this cryptocurrency has no end in sight. First, there are logistical reasons. According to the initial terms of the cryptocurrency, the "halving" planned for 2024 will halve Bitcoin's production. By then, the total quantity of Bitcoin will only be 21 million. The scarcer it is, the higher its value and wealth. Another reason is historical. In recent years, even with various crises, the price of Bitcoin has never returned to below $10,000 before the COVID-19 pandemic. Therefore, only a small portion of investors who bet on Bitcoin during the peak of the "digital gold" in 2020 and 2021 are currently losing their bets. Other investors are often winners.
Asset management companies understand this well: longevity is an ally. BlackRock, one of the world's largest asset management companies, is currently pushing for the establishment of a dedicated fund on the stock market, namely a "spot" exchange-traded fund (ETF). This kind of fund is very easy to manage for retail and institutional investors. This new financial instrument partly explains why Bitcoin is currently surging, and even Ethereum and other cryptocurrencies may join the ranks of ETFs. After all, Bitcoin "only" occupies 50% of the cryptocurrency market, and the size of the cryptocurrency market has grown from $180 billion in early 2017 to the current $16.3 trillion. |
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Post time 8-1-2024 09:34:35