Director Gu Yanshi, a researcher under CBX of the Dubai cryptocurrency exchange, argued that “the bull market for bitcoin will continue” on Feb. 24, in a contribution by the Chinese media. The uncertainty of regulation was analyzed in detail. The following is the full text of the contribution.
The bitcoin market has experienced a sharp decline over the past two days. The drop of $10,000 per day is the biggest daily drop in Bitcoin history. It fell from the highest price of $58,000 to the $46,000 level in two days. Although Bitcoin showed a big decline in the short term, I think the Bitcoin bull market will continue. The long-term and short-term factors that have increased the price of bitcoin continue to exist. The current decline is a short-term correction and cannot be seen as the beginning of a bear market for Bitcoin.
As a long-term factor, an oversupply of the US dollar continues to exist. The market is fully anticipating the resulting inflation and falling dollar value, and is adopting corresponding measures to hedge these risks. As a result, there is a strong tendency to buy more rare assets in the market. These are luxury real estate, high-end stocks and bitcoin, all of which attracted large amounts of money.
# Short-term factors are positive for Bitcoin
Looking at the short-term factors, some of the predictable events this year will have a positive impact on Bitcoin.
The first is the listing of Coinbase. In the current private equity market, the market value of Coinbase continues to rise. It is currently worth $100 billion. If listed at this price, Coinbase could become a company with the second largest market capitalization after Facebook.
The second short-term factor positive for Bitcoin is the bitcoin ETF application. Currently, VanEck, Morgan Stanley, and NYDIG have already submitted applications to open Bitcoin ETFs. The likelihood of these applications being approved is higher than in the past. The main reason for the SEC’s recent refusal to approve the Bitcoin ETF was the lack of a reasonable consignment mechanism and market price manipulation. However, in the meantime, Bitcoin’s entrustment mechanism has improved significantly. In particular, the US Monetary Authority made it clear last year that the Federal Reserve Bank can provide fiduciary services for digital currencies, and Bitcoin’s fiduciary mechanism has already begun to improve.
The possibility of manipulating the price of the Bitcoin market still exists. Price manipulation also occurs frequently in general stock exchanges. Therefore, for regulators, cracking down on market price manipulation is a long-standing challenge. Therefore, for this reason, it is impossible to completely reject a Bitcoin ETF application. Unlike the previous SEC chairman, Garry Gensler, who will be the new SEC chairman, is in favor of Bitcoin. Accordingly, the likelihood that the SEC will approve the opening of a Bitcoin-based ETF is much greater.
Bitcoin has already started circulating in the US market. Individuals can buy and sell bitcoin through companies like Coinbase, PayPal and Square. Institutions can also buy and sell bitcoins through institutional products such as Coinbase and Grayscale Bitcoin Trust. Thus, refusing to approve Bitcoin ETFs does not protect US investors from losses due to market price manipulation. From a global perspective, both European Bitcoin-based ETPs and Canadian Bitcoin ETFs are welcome in the market. This will affect the US SEC’s ETF approval. If you want to understand the impact of the Bitcoin ETF on the price of Bitcoin, it will be easy to understand by looking at the gold price trend since the creation of the gold ETF.
# Stable coin distribution such as DM is also positive
The third short-term factor positive for Bitcoin is the circulation and use of the stablecoin Diem. At the end of 2020, the Diem Association announced that it had submitted an application to FINMA in Switzerland and is awaiting FINMA approval. It has not entered operation yet, but it is highly likely to start this year. Earlier this year, U.S. financial regulators made it clear that they would support stablecoin development. Therefore, the distribution and use of stablecoins in the US market is a very probable event. When DM stablecoin begins to circulate, it is certain that some of it will flow into the cryptocurrency market, which means that it will flow into bitcoin transactions. This will certainly help increase the price of Bitcoin. In the case of stablecoins, there is a high possibility that a US commercial bank will launch its own USD stablecoin in addition to DM. This will also be very positive for Bitcoin transactions.
# More companies buying Bitcoin
In terms of institutional bitcoin purchases, more U.S. listed companies are expected to announce bitcoin purchases this year. This is definitely positive for Bitcoin. Some analysts predict that Tesla will buy more bitcoins. Purchases from these institutions will certainly support the continuation of the Bitcoin bull market.
In terms of bitcoin buying behavior, the pattern of’long-term retention after purchase’ is increasing. This shows the tendency of individual and institutional investors to hold Bitcoin as a hedge asset. It also provides a very strong foundation for Bitcoin’s long-term stable growth.
In terms of application of Bitcoin, payment based on the Lightning network is also a very strong advantage. In the future, there will be more applications for legal currency payments across borders. That will lead more users to transact on the Bitcoin network. Bitcoin’s widespread liquidity around the world will certainly increase its attractiveness as a store of value.
In terms of the basic data of the Bitcoin network, the number of Bitcoin nodes, the number of network wallet addresses, and the total amount of network value transferred are all reaching all-time highs. These data show that Bitcoin is becoming more and more accepted in the market.
# Regulatory uncertainty is the biggest anxiety factor
Meanwhile, despite these positive factors, Bitcoin is still a controversial product. For example, the new U.S. Treasury secretary, Yellen, recently said that bitcoin can be used for illegal activities and is a highly speculative commodity. European Central Bank governor Lagarde also stressed that bitcoin is a highly speculative commodity and requires stronger oversight. There are certainly regulatory uncertainties in bitcoin transactions and circulation. In fact, the regulatory factor is Bitcoin’s biggest anxiety. Therefore, there will still be considerable fluctuations in future bitcoin transactions. However, I think the long-term uptrend is certain. For ordinary investors, if you acknowledge this trend in bitcoin, you will be able to gradually hold bitcoin as a funded investment method. It is not forbidden to expect profits using leverage in Bitcoin transactions.
