EXECUTIVE SUMMARY:
The cryptocurrency known as Bitcoin has seen a price jump of more than 74% in 2021 alone. It’s now trading above $50,000 per share. Only a few short years ago, Bitcoin traded at $50.00 per share.
You’re late to the party if you haven’t already heard that Elon Musk is betting on Bitcoin. In January, Musk moved to transition $1.5 billion of the company’s profits into the cryptocurrency. He’s even toyed with the idea of creating his own digital dollar. It could be called ElonCoin.
Bank of New York Mellon Corporation and MasterCard are both embracing digital currencies. The banks are integrating Bitcoin assets and/or services into their systems. An increasing number of financial services corporations are permitting customers to trade in crypto and otherwise taking cryptocurrencies seriously.
The maximum total value of Bitcoin in circulation at one time cannot exceed 21 million Bitcoin. However, the actual amount in circulation at a given moment is likely to be millions less than that figure. The reason? People have lost their private key information or passed away without sharing their credentials.
For Bitcoin trading, are markets moving too fast?
In a survey of finance executives across 77 organizations, research analysts concluded that Bitcoin is too volatile for widespread adoption as a standard currency, an investment, or as a feature on corporate balance sheets. “Board risk aversion” represented a key rationale for rejecting the cryptocurrency. However, 5% of survey participants noted that they may personally invest in Bitcoin this year.
The President of the European Central Bank, Christine Lagarde, asserts that Bitcoin is not a real currency and that the European Central Bank does not have plans to integrate it into its offerings or assets.
In relation to investors and day traders, economist Nouriel Roubini contends that “Many are buying at prices that are ridiculous” and that as a result, “they are going to get burned”.
What’s fueling the Bitcoin buy up?
In addition to the Bitcoin purchases by tech titans, concerns about protecting economic gains have driven investments in Bitcoin. Does printing currency have its tradeoffs?
“There were trillions of dollars that were printed and injected into the economy and everyone from individuals to financial institutions and corporations ran around the world looking for the best ways to protect their purchasing power; they ultimately decided it was Bitcoin,” says Anthony Pompilano, co-founder and partner with Morgan Creek Digital Assets.
In addition, the following contribute to the Bitcoin trading craze:
- Fear of missing out
- Low return rates on alternative assets
- It’s mainstream, but still edgy enough to be cool
- Increased credibility as an asset class
- No one knows Bitcoins’ true value, so Bitcoin trading may offer infinite potential, according to select groups of analysts.
Bitcoin trading competing with gold?
Bullish predictions estimate that investments in Bitcoin could send the cryptocurrency well past the $500,000 per share threshold. Nonetheless, risks abound. Says Nikolaos Panigirtzoglou, of JP Morgan, “…When the economies reopen, people go back to the office, they have less time to trade at home…flow impulse slows…”, suggesting that the trading trend may sputter to a stop.
For more on Bitcoin trading, visit The Wall Street Journal.
