Is Bitcoin really going to "conquer" people?

The Independent

During the Spring Festival, the price of Bitcoin was a breeze. On February 16, it broke through the $50,000 mark and stood at $52,000. Since entering the upward channel in November last year, Bitcoin's rise has been amazing. This year alone, it has increased by nearly 80%; compared with the same period last year, it has increased by more than 400%.

The upsurge of "violence" that lasted for several months has made the market no longer able to ignore this asset that has long been out of the eyes of mainstream institutions. From time to time, a well-known Wall Street institution announces that it will buy Bitcoin to prove that this alternative asset that was once "ignored" has now become a sought-after sweet and pastry. Fans claim that Bitcoin will "grow up" those who don't believe it.

Is it true? Mainstream analysis believes that this round of Bitcoin's rise is different from before, mainly due to the difference in investor structure. This round of bull market is mainly driven by institutional investors, and retail investors are less involved, especially after breaking through the previous highs, retail investors who have been locked up in the early stage are "liberated" and new entrants rarely dare to follow the trend. Institutional investors here mainly refer to Grayscale. The main purchasers of its products are major institutions on Wall Street, including hedge funds, mutual funds, family offices, etc. Grayscale compliant trust products are provided for restricted institutional investors Channels to buy Bitcoin. After individual listed companies claimed to have bought Bitcoin, their stock prices also rose in the short term, which further strengthened the public's impression of Bitcoin making money.

The root cause of the rise is that major central banks around the world have "released water" one after another, and people are worried about asset devaluation. Bitcoin is a digital asset, and institutions use it as part of asset allocation to resist the bubble of traditional assets. Compared with traditional assets such as stocks, Bitcoin's market value is not high. At a price of $50,000 per coin, the total market value of Bitcoin is equivalent to the market value of Tesla, which is 1/3 of Apple's market value. For institutions with plenty of bullets, large asset allocations can easily drive prices up.

Judging from the configuration of most institutions, the proportion of alternative assets is originally small, and Bitcoin as a part of it accounts for a more limited proportion. Some smaller asset management institutions purchase at the request of customers and implement total control. Institutions' allocation of Bitcoin may only be a tentative purchase, and there is no consensus on its future.

For ordinary investors, although it is hard to say that the price of Bitcoin will peak in the short term, they should remain sober. Bitcoin is a high-risk asset, not a safe-haven asset. Current market expectations for inflation are beginning to diverge, and economic activity will resume further as vaccines are launched in various countries. Under the dual pressure of economic recovery expectations and high inflation expectations, the market speculates that major central banks in the world will gradually withdraw from the existing easing policies. When the monetary policy will gradually change from loose to moderately tightened, institutional investors are likely to sell Bitcoin, which requires a high degree of vigilance.

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