MCS | The Meaning of Institutions Entering Bitcoin (BTC) Market

MCS | The Meaning of Institutions Entering Bitcoin (BTC) Market


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Recently, the price of Bitcoin (BTC) has moved sideways around the previous high in 2017 and is looking to break the $20,000 level. Psychological resistance to the $20,000 level is not small, but surpassing this resistance level is accepted as a fait accompli not only to the cryptocurrency industry but also to the traditional financial market. Bitcoin (BTC), which plunged to $4,000 in March 2020, has sprung back to a price of nearly 500% increase in about 9 months and is rewriting the history of its peak.

The main reasons for the price surge are as follows:

1. Paypal Effect

The customers of Paypal, a global remittance/payment provider with hundreds of millions of accounts, can now directly purchase Bitcoin (BTC) from Paypal.

2. Increased Institutional Interest

Institutional investors are buying Bitcoin (BTC) trust products, and large asset managers such as Guggenheim are willing to invest in Bitcoin (BTC), and so the basis for entering the Bitcoin (BTC) market is widening.

3. Increased Liquidity Due To The COVID-19 Crisis

The Federal Reserve Board (FRB) printed $3 trillion in 2020 alone to support the economic downturn caused by the COVID-19 pandemic. With the addition of currencies from Europe and other developed countries, the size of newly issued currencies in 2020 is larger than during any previous economic crisis. A large amount of the expanded liquidity appears to have flowed into the Bitcoin (BTC) market.

4. The Increase of Large-Scale Investors

Even renowned hedge fund experts, entities, and analysts in traditional financial sectors have a positive outlook on the Bitcoin (BTC) market and are also participating in actual investments. Their impact on the market is not small.

In addition to this, there are many reasons for the rise of the Bitcoin (BTC) price, but the biggest difference from the Bitcoin (BTC) price surge in 2017 is that the Bitcoin (BTC) market in 2020 is institution-centered. On that basis, while the price of Bitcoin (BTC) has risen sharply to its previous high, the level of Bitcoin (BTC) search on Google has not significantly changed from the average value over the past three years. This is also evidence that individual investors did not raise prices in anticipation of a rapid price increase, but that institution-centered buying was dominated.

This influx of the institution's Bitcoin (BTC) market means a lot.

First of all, it is distrust of the current monetary system. As mentioned above, with the pandemic as an opportunity, many countries have opted to boost the economy through quantitative easing policies through bond issuance, but the prolonged COVID-19 pandemic and the wrong wealth distribution system have not seen the intended effect. Even in the 2008 economic shock from Lehman, most advanced countries implemented economic stimulus policies through quantitative easing. In the next decade or so, in various small crises, developed countries have boosted the economy by increasing their debt. Already, the growth rate of sovereign debt in major countries, including the United States, is enormous, which could serve as a signal that the current monetary policy governance may be at risk. As proof of this, every time a currency was printed, the gold price went up high, and along with the Bitcoin (BTC) price.

It is reasonable to see that the institution is hedging the risk of holding assets that are limited to certain countries with gold and Bitcoin (BTC), assets without borders. Unless there is a drastic change in the way we deal with economic risks, this will keep happening. In other words, the price of gold and Bitcoin (BTC) has a lot of room to rise steadily in the long run.

If we put gold and Bitcoin (BTC) in the same position as a risk hedge for institutional and asset prices, the long-term price increase of Bitcoin (BTC) will be far beyond gold. In addition, when traditional financial products related to gold are developed as Bitcoin (BTC) derivatives in a similar position, the demand may further increase.

At the moment, when to cross the hurdle of $20,000 is the biggest issue, but it seems very likely that the status of Bitcoin (BTC) will expand into a single financial underlying asset in the future.

It is impossible to discuss the status of Bitcoin (BTC) apart from existing traditional finance. However, if you look at what kind of asset Bitcoin (BTC) is perceived by players in the current traditional financial market, the macro status of Bitcoin (BTC) may be predictable to some extent.

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