[디센터의 블록체인 Now] Bitcoin status changed in 3 years
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‘The rules of the game have changed.’
Cryptocurrency market experts stressed that it is different from the bull market in 2017, regarding the bitcoin rally that began in the second half of last year. It is similar in that the price of bitcoin rose sharply in a short period of time, but analyzing the factors that led to the price increase shows that the market is clearly different from that of three years ago. Recently, after Joe Biden’s first Treasury nominee, Janet Yellen, said that “the use of bitcoin should be regulated,” the uptrend has been braked, but the market collapses as in the past, potentially causing investors to panic. The analysis that is low is dominant.
Nominee Yellen’s remarks on bitcoin regulation came from the process of emphasizing that “we should consider ways to reduce the use of bitcoin for illegal finance and prevent money laundering”.
In fact, the cryptocurrency market such as Bitcoin has changed a lot compared to three years ago. Among them, the most remarkable is the change in the supply and demand entity. The bull market in 2017 was led by individual investors. However, the industry’s norm is that this rally is led by institutional investors. Investors who treat cryptocurrencies such as bitcoin as’alternative assets’ and as part of portfolio investment have begun to emerge.
The NASDAQ listed companies Square and MicroStrategy started investing in bitcoin with the company’s equity capital. It is reported that there are over 70,000 bitcoins that MicroStrategy bought last year. Massachusetts Mutual Life Insurance, an American insurance company with 170 years of history, has invested $100 million (about KRW 110.2 billion) in Bitcoin.
Grayscale, a cryptocurrency investment manager, raised a total of 3.3 billion dollars (about 3,629.6 billion won) in the fourth quarter of last year alone. Of these, institutional investors amounted to 3 billion dollars (3.39 trillion won), over 90%. The cumulative amount that Grayscale recruited from 2013 to the end of 2019 is 1.2 billion dollars (1.3203 trillion won). In the fourth quarter of last year alone, three times the cumulative recruitment amount for seven years was collected.
As institutional funds steadily flowed into the cryptocurrency market, optimism that bitcoin could replace gold emerged around Wall Street in the United States. Rick Leader, CIO of Black Rock, the world’s largest asset manager, predicted that “in the future, bitcoin will be able to replace gold.” In other words, the price will skyrocket to 318,000 dollars (34,989 million won).” JPMorgan Chase, a global investment bank, also analyzed that if bitcoin is recognized as a store of value to replace real gold, its price could reach $146,000 (16,061 million won) in the long run.
The reason Bitcoin is compared to gold is that it has limited reserves and issuance. According to the Korea Gold Exchange, the total world gold holdings is about 178,000 tons. The world reserves are only 70,000 tons. Bitcoin is also limited to 21 million. The amount of mining is designed to be halved every four years. Currently, Bitcoin is mined at 18.6 million units. By 2140, coin mining is also over. An official in the cryptocurrency industry said, “Both gold and bitcoin are similar in that their supply is less than demand.” It is because of this scarcity that the value of money falls and gold is attracting attention as a safe asset during the economic crisis. Like gold, bitcoin can also function as a means of storing value.” It is important to be wary of excessive optimism, but this outlook will inevitably serve as a boon for the mid- to long-term supply and demand of bitcoin.
Another reason why the cryptocurrency market such as bitcoin has changed from the past is that advanced financial countries are improving regulations and systems related to cryptocurrency. Excessive regulation shrinks the market, but in the early days of the market, appropriate regulations and institutions must be prepared before the market disorder can be prevented and the industry can grow stably. In fact, the background of institutional investors’ funds flowed into the cryptocurrency market since the second half of last year is related to regulatory and institutional maintenance. The U.S. early incorporated the cryptocurrency business into the system at the state level. In New York State, since 2015, it has been issuing a’bit license’, a kind of business license, for cryptocurrency businesses. The Currency Supervisory Service (OCC) is leading the activation of cryptocurrencies in the financial sector. In July last year, commercial banks were allowed to provide cryptocurrency consignment services to customers. In addition, the bank has approved the ability to hold the’stable coin’, a cryptocurrency that is linked in value with the legal currency, as a reserve for payment. Japan revised the Money Settlement Act in 2016 and recognized cryptocurrency as a payment method. In 2017, the cryptocurrency exchange was regulated to operate its business after obtaining a license approval from the Financial Services Administration (FSA). In 2019, it was judged that the nature of cryptocurrency has changed from a payment method to an investment asset, and the Funds Settlement Act and the Financial Products Act were revised once more. Cryptocurrency derivatives are also recognized as financial products in accordance with the amendment that took effect in May last year.
As the regulations of each country are established, the aspect of companies that provide bitcoin investment services has also changed. In 2017, virtual asset exchanges operating in the blind spot of regulation have provided investment services. However, the situation has changed as the virtual asset system has been reorganized in the financially advanced countries. Intercontinental Exchange (ICE), which operates the New York Stock Exchange, has launched a cryptocurrency exchange Bakkt service for institutional investors. Techpin companies such as Square and PayPal also provide bitcoin trading and storage services.
Despite the changing status of Bitcoin, there is still a critical view of the cryptocurrency market. The massive liquidity released on the market is not finding a place to invest and is focused on bitcoin, but if the value of other assets such as gold and dollar rises, the funds can be withdrawn at any time. In a report released on the day, Hana Financial Investment said, “It is undeniable that bitcoin and gold have a lot in common, and that bitcoin and other cryptocurrencies are gradually taking their place in the financial market. It is difficult to store wealth or use it as a medium of exchange because it is more volatile than assets.” He added, “At present, the investment in bitcoin is not as a substitute for gold, but a speculative bet that one day will function as a currency is key.” Han Ho-hyun, chairman of the Korea Digital Signature Forum, also pointed out that “the price fluctuations in bitcoin move independently of the technical content of bitcoin,” and pointed out that “Bitcoin still has many technical areas to overcome.”
/ Reporter Noh Yunju and Do Yeri [email protected]
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