Bitcoin has demonstrated phenomenal growth – and many are asking how and why this has happened?
There are several factors which are immediate visible on the surface:
1) The arrival of major investors (hedge funds, and family offices who see no difficulty in investing 1% of their capital “just to see”. For these investors it’s important that Bitcoin emerges from the ranks of exotic assets, and becomes recognized by regulators.
2) The launch of futures. This will clearly increase liquidity, and make it possible to play the exchange-rates for American investors… without the risk of losing your Bitcoins (!).
3) Media hype and resulting euphoria among the public
However, unlike other kinds of speculative ‘bubbles’ on the markets based on the prices of different assets (just take a look at movements in the silver price over the last 40 years?) the current surge in the Bitcoin price has an ideological basis behind it.
Many people have high hopes that Bitcoin will pull the legs from under the current financial system – which is what prompts all the comparisons of Bitcoin’s capitalization with that of world currencies, and the value of banks. Business has grown truly weary of continuous pressure from regulators (and regulators have recently been bombarding the offshore markets too), while people themselves have become sick of non-transparent operations, inflation, and crises.
This may perhaps be the first time that people have begun saying of Bitcoin that ‘have a look, it’s working!’. I doubt that Bitcoin will become the world’s No 1 currency – but as a ‘driver for change’, and a ‘disruptor’, it has a big future.
However, if we look at the industry with an insider’s viewpoint, the number of people ready to step up to the plate – rather than merely cheering the rise in value from the sidelines and keep checking the price – is really negligible.
Decentralization is the long-term trend that’s worth fighting for. What’s going on now, almost imperceptibly, is that regulators are either shutting down stock exchanges, or turning them into banks (like Coinbase).
On top of all this, Bitcoin Futures are turning into a ‘paper’ (ETF) equivalent – yet another step in divorcing investors from reality. Total control over the infrastructure creates huge opportunities for market manipulation.