But here are 7 reasons why I don't see it happening
I was late to the Bitcoin party. Since arriving I’ve been determined to enjoy what were left of the good-times.
I’ve listened with rapt attention to those who arrived unfashionably early. I’ve enjoyed the mounting excitement as others arrived after me, until it reached its current crescendo of hands-in-the-air good-times.
I’ve dined hungrily at the buffet of Bitcoin, picking up every tasty morsel of information that I could lay my hands on. I’ve invested what I could afford, all while feeling grateful to at least have had a taste of the good stuff.
At this point I’m slumped in the corner, streamers hanging haphazardly around my neck and a party hat balanced precariously on my head — my arm wrapped protectively around the Bitcoin punchbowl having drunk liberally from it.
The party is still going on and as much as some are calling for it to end, I don’t see that happening any time soon, if ever.
I’ll drop the party metaphor at this point — it’s tiring to write and probably to read too.
When I first invested the price of a single Bitcoin was $23,000. Within my first week of holding a minuscule amount it had climbed above $30,000 — I felt like an investing genius, strutting around while celebrating my 30% return.
Since then it’s climbed higher, reaching above $60,000 and currently hovering around the $50,000 mark.
Each price is symbolic and largely arbitrary. Each new high prompts Bitcoiners to predict that it’ll go even higher. Simultaneously the skeptics warn that its imminent crash is now even more likely.
When I read speculative forecasts (guesses) from investors and financial institutions that the price will reach $100,000, $300,000 or even $1million per Bitcoin, I scoff — but also find them believable.
Secretly I’m hoping for a big dip in price before the bull-run continues — mainly as I want to invest further and get more Bitcoin for my money. I doubt this’ll happen though.
No, I think the Bitcoin party is destined to carry on.
This may just be confirmation bias on my part — wanting reassurance that I’m smart, sensible and not in the least bit deluded for believing in Bitcoin. But it’s also because the evidence seems so utterly compelling to me.
Photo by Annie Spratt on UnsplashFinancial institutions are getting onboard with Bitcoin
A big part of the original use-case for Bitcoin was about decentralising the apparatus of global finance and removing the restrictive hold of governments and conventional financial institutions over the monetary system that we all use. Trends in the industry suggest that while Bitcoin was once something that CEOs could afford to laugh about and dismiss out-of-hand, things have changed.
Whether this is mainly because the technology has proved itself or whether banks and investment managers are having to cave to the desires of wealthy clients who want to add cryptocurrency to their portfolios, the effect is the same. It is cementing Bitcoin’s position as an enduring part of the future financial landscape.
1 — Banks are starting to offer crypto services
In February 2021 the oldest banking institution in America, BNY Mellon announced that it will hold, transfer and issue Bitcoin on behalf of its asset management clients. Meanwhile, cryptocurrency compliance firm Elliptic has confirmed that many other banks are seeking regulatory approval in preparation for offering digital asset services.
Banks that previously declared cynicism over Bitcoin and crypto have been publicly changing their stance, demonstrating that perhaps it has proven worthy of finally being taken seriously by them. JP Morgan are a great example — having once stated that Bitcoin was “a fraud”, the bank has recently predicted it could reach a long-term valuation of $146,000.
2 — FinTech companies are integrating with blockchain technology
Following news that Tesla will accept payment for new electric vehicles in Bitcoin, PayPal have announced they are rolling out the facility for 29 million merchants worldwide to accept Bitcoin in payment over the coming months.
This news came shortly after Visa had announced they’d be piloting technology to enable the settlement of transactions using stablecoins on the Ethereum blockchain. Such moves are creating an intersect where the conventional financial establishment starts engaging and integrating with the world of blockchain technology. Mastercard too have caved and are introducing technology to allow a select range of cryptocurrencies to be transacted on their network.
Such unions were previously inconceivable, but the tides seem to be shifting.
3 — Investment Funds are launching to cater to demand
February saw the launch of the first North American Bitcoin Fund. Purpose Investment’s Bitcoin Fund launched on the Toronto Stock Exchange and collected $421.8m of Assets Under Management in its first day.
Since then Fidelity Investments, SkyBridge Capital, VanEck, WisdomTree and Morgan Stanley have launched or are applying to launch Bitcoin ETFs. Former Bitcoin skeptic Goldman Sachs are reportedly close to offering crypto assets to their wealth clients too.
These moves suggest that firms which have previously been sat on the fence now see the advantages offered by crypto assets or are simply bowing to pressure from their clients who are demanding such products be created.
Source: Twitter
Bitcoin is drawing the interest of investors
Part of the reason why Bitcoin seems likely to endure is due to the ever-increasing number of people who are getting involved with it. A significant part of this is self-propagating — the more people who invest, the more it pushes the price up and draws in others to do the same.
4 — Institutions are adding Bitcoin to their balance sheets
MicroStrategy started a movement when it invested large chunks of its corporate treasury in Bitcoin under the lead of CEO Michael Saylor. In February, Tesla bought $1.5billion of Bitcoin and immediately made an estimated $500 million profit on their holding as a result of the price increasing. Square too hold Bitcoin on their balance sheet.
Speculation online is now rife as to which corporations will be next — Apple? Oracle? The more that large, recognised companies invest in Bitcoin the more it helps to cement its status as an asset that is destined to enjoy a long-term future.
5 — More and more individual investors are seeking to get involved
One measure that helps to assess the number of individual investors who have taken a stake in Bitcoin is the number of crypto wallet addresses that exist on the network.
As the chart below suggests, the number of unique wallets has grown drastically and is growing ever more rapidly of late — over 70 million wallets now exist and while some of these are the so-called ‘whales’ with enormous individual holdings of BTC, many of these are private investors with only minute fractions of a Bitcoin in their holding.
Source: StatistaA further measure is the relative scarcity of Bitcoin available on major cryptocurrency exchanges lately. A report from February 2021 suggests that the quantity of coins available on exchanges is at a 2.5 year low and this can be seen clearly in the visual below:
Source: Twitter
Supply and demand is king of course, and with sufficient demand the prices will continue to increase as new sellers decide to liquidate some or all of their holding.
What illustrations like these suggest though is that the market of those looking to sell is dwindling — bitcoiners seem ever more inclined to buy and hold; unsurprising given how the price is climbing this year. Why would you sell now when the price continues to climb further?
Bitcoin has a finite supply built into its protocol and is an acknowledged investment asset (albeit one that governments seem to feel compelled to label as ‘speculative’). That the supply of coins for sale is dwindling suggests that demand continues to grow and could eventually outstrip supply. Either way, it is a positive sign as far as the future price of Bitcoin is concerned.
6 — Governments are engaging with Bitcoin and blockchain
I’ve previously shared my perspective on how many key individuals in governments around the world seem remarkably ill-informed regarding cryptocurrency. The same cannot be said for Mayor of Miami, Francis Suarez.
Suarez is plainly a Bitcoin believer and in addition to piloting programs for city employees to be paid in Bitcoin and for citizens to pay for services using it too, he has also shared a plan to eventually use Bitcoin for investing the city treasury into.
Source: Twitter
Political leaders in states including Wyoming and Kentucky are also positioning themselves as pro-Bitcoin and seeking to draw digital asset companies to their states, signifying that while the US Federal Government is skeptical, they’re not willing to be left behind.
It seems likely to me that more and more local and national governments will be encouraged to follow suit, which will also stabilise Bitcoin’s price and position in our future world.
Bitcoin still has a long way to go
7 — The market capitalisation is still relatively low for a gold-equivalent
When its price reached $53,000 the market capitalisation of Bitcoin exceeded $1Trillion for the first time.
Consider that gold (often the most often-quoted investment asset for Bitcoin) has a market capitalisation in excess of $10.5Trillion. There’s no real reason to expect that money invested in gold should dictate how much is ultimately stored in Bitcoin. Money that’s in gold currently won’t necessarily move over to Bitcoin either.
But this valuation of gold suggests that as an investment asset and store of value, Bitcoin has a great deal more potential to fulfil.
Some would point out that gold has other utility too — as jewellery and in electronics. But so does Bitcoin, as an integral part of the decentralised finance system of the future.
Many skeptics focus on it being ineffective as an alternative to conventional means of transacting value (such as Visa and Mastercard) but there will likely be a future use-case for Bitcoin being used for transaction processing nonetheless. It may for example be used for large transactions between institutions rather than between consumers and merchants.
The embracing of Bitcoin and other cryptocurrencies and blockchain technologies mentioned earlier are good illustrations that many large FinTech companies see potential in it.
Summing up
I was undoubtedly late to the Bitcoin party. But as a comment on one of my recent articles pointed out, I’m still relatively early in the scheme of things.
There are many reasons to suggest that a crash in price is due, and many who warn with doom and gloom that Bitcoin is a bubble that’s long-overdue to burst. But for all the reasons stated in this piece I just don’t see that happening:
1 — Banks are starting to offer crypto services
2 — FinTech companies are integrating with blockchain technology
3 — Investment Funds are launching to cater to demand
4 — Institutions are adding Bitcoin to their balance sheets
5 — More and more individual investors are seeking to get involved
6 — Governments are engaging with Bitcoin and blockchain
7 — The market capitalisation is still relatively low for a gold-equivalent
Taking these factors into consideration I don’t feel too bad about missing the first few years of the Bitcoin party — I’m confident there’s still plenty of fun to be had.
Note: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.