What happened?
Bitcoin price hits new high
The highest price in history of $68,997.76 set by Bitcoin two years ago on November 10, 2021 was broken. On March 11, 2024, Bitcoin broke through the highest price in history, hitting a new high of $72,886. Bitcoin is up about 63% so far in 2024, outperforming global stock markets. From 2024 to March 11 alone, Bitcoin has increased by more than 72.49%, and in the past year it has increased by 188.38%.
The total market value of BlackRock’s spot Bitcoin ETF has exceeded 10 billion US dollars in just over a month since its listing. The total market value of Bitcoin has surpassed that of silver, becoming the eighth largest asset in the world by market value—gold still ranks first, followed by the top six listed companies in the world by market value.
Data shows that since the beginning of 2024, Bitcoin ETF funds have inflowed as much as US$10.6 billion, while at the same time, physical gold ETFs have outflowed US$7.6 billion.
It’s been just over two years, what changes have taken place?
Investors buy in
To put it bluntly, it is not valuable. The reason is simple──investors bought in large quantities.
Institutional buying demand has been a major driver of market activity over the past few months, particularly through inflows into new Bitcoin spot ETFs.
The recent Bitcoin rally has been driven by record inflows, with $8 billion worth of net new demand pouring into nine new Bitcoin spot ETFs over the past 60 days. What we’re seeing are historic, record-setting levels of activity. Pandora’s box has now been opened.
The participation of retail investors has also begun to recover.
Bitcoin Critics’ Reasons
Real life value is zero
There seems to be no doubt that Bitcoin is not as good as gold and has its own special uses in industry to prove the value of gold.
But don’t forget – “the value of everything in this world, including visible or invisible things, is subjectively assigned by people“. For example, a person’s salary level in the job market, as long as someone is willing to bid, you are worth this price, and no one is willing to bid to hire you. Even if you have a doctorate and ten years of work experience, the market value is zero. It’s not rare, and it’s in the news all the time.
This reminds me of the sharp decline in diamond prices in recent years. Because people have begun to find that the market price of diamonds is obviously unreasonable. The so-called rarity of man-made diamonds attributed to diamond prices in the past, or the value created invisibly by marketing slogans, cannot withstand people’s scrutiny. Moreover, the emergence of artificial diamonds, which are more practical and popular than artificial diamonds, exposed the king’s new clothes in one fell swoop.
Note: For a long time, the market price of global diamonds has been artificially controlled by a few one or two manufacturers, making it an extremely opaque commodity.
Another better example is the ubiquitous derivatives in financial markets. Derivatives are a typical form of abstraction. The “itself” of a derivative is something without any physical value. When it was first launched, it was criticized by critics. But what now? Few people would deny the value of derivatives.
The value of all works of art is artificially assigned. Van Gogh’s paintings bought when he was unknown could only be used as wallpaper. After his death, people’s value of his works changed 180 degrees.
Hype
All assets, as long as there is a price in the market, will definitely be manipulated, especially new emerging assets like Bitcoin. Since the price is unknown and fluctuates violently, it is more susceptible to speculation.
This is true. Popular investment targets with high returns will be hyped, not just Bitcoin.
Rarity
In addition to its practicality, the other biggest reason for gold’s value is its rarity. But critics believe that cryptocurrencies such as Bitcoin are artificially created and do not possess the rarity of assets.
But in fact, this is not true for Bitcoin, or this just proves the existence value of Bitcoin, because the number of Bitcoins is actually fixed.
Highly fluctuation
Prices fluctuate violently is a commonality for all new investment targets, including newly listed stocks and funds raised by new startups; perhaps because the total market value is still low and pricing is difficult, and the market has not yet reached a consensus on the price and future of the target, the market price will experience large fluctuations.
Fluctuations, which of course come with investment risks. Therefore, the people who raise this question are unreasonable, because such a phenomenon will definitely occur. This is common sense and does not only occur in Bitcoin.
Bitcoin will continue to experience violent price fluctuations in the future and will not stop until the vast majority of people in society accept it. At that time, the price fluctuations will ease, but the return rate will be very low at that time. Like stocks with stable prices and high stability, it is impossible to bring you high returns.
Why Bitcoin price reaches new highs?
US approves Bitcoin spot ETF
For this, please see the explanation of my two previous posts:
- “Bitcoin ETF spot trading approval has far-reaching impact“
- “Cryptocurrency ETFs drive surge in related companies“
Financial industry begins to accept Bitcoin
After ten years of hard work, the financial industry, mainly Wall Street, such as wealth management companies, pension funds, and large commercial banks, have changed their attitude towards Bitcoin from rejecting current customers to including members of their diversified asset management.
BlackRock’s (ticker: BLK ) iShares Bitcoin Trust (ticker: IBIT ) has surpassed $10 billion in assets under management just seven weeks after the fund began trading.
Bank of America’s (ticker: BAC) Merrill Lynch unit and Wells Fargo’s (ticker: WFC) brokerage arm are offering spot bitcoin exchange-traded funds to clients, expanding the number of Wall Street giants to accept such products.
Long-term depreciation of fiat currency
Not only the U.S. dollar, but all fiat currencies in the world have a fatal flaw. Fiat currencies will depreciate in the long run. This is an undeniable law. The U.S. debt increases by $1 trillion every 100 days, accelerating depreciation, which is good for assets such as Bitcoin. This helps explain why assets like gold and Bitcoin are trading near all-time highs.
Rarity
As mentioned before, the number of Bitcoins is fixed and will not increase. And it’s halved again this month, further reinforcing its rarity value. The halving event will of course reduce the supply of Bitcoin, thereby pushing up its market price.
Note: Bitcoin halving reduces the reward for mining, affecting supply and potentially increasing value. Halving events, occurring approximately every four years, have historically been followed by price surges. The next halving in April 2024 will decrease the block reward to 3.125 BTC, influencing supply and demand dynamics.
It’s hard to be different
Most investors who invest in Bitcoin are doing short-term speculation and just want to trade at the right time or take profits quickly and get rich in the short term. Facts have proved that such investors are no different from the tulips or the South Sea bubble in investment history. One of the big reasons why Monger is known as the pioneer of various cryptocurrencies is based on this principle.
For investors who bought Amazon stock 28 years ago and have held it for a long time, almost all their relatives and friends would think this person is a lunatic. What about now?
Among new start-ups, especially those that disrupt the market (to put it bluntly, from the perspective of ordinary people, they will not end well and are mentally ill), which one had a smooth first five years of business? Rare, if common, I daresay, his startup is not market disruptive at all.
Basically, what successful entrepreneur hasn’t endured overwhelming attacks? But after successfully gaining market acceptance, there will be icing on the cake everywhere – this is a necessary step for successful people, without exception.
You only need to look at the acceptance of Bitcoin by Wall Street people now (please note that I am talking about now, now), especially wealth managers, pension funds, and large commercial banks who have astronomical amounts of real money in their hands. Why five years later? There was a 180-degree turn, and everything suddenly became clear.
Note: So far, JPMorgan Chase and Vanguard are the representatives of the “minority” (please note: compared with five years ago, they have now become a minority) who are still opposed to Bitcoin among the mainstream Wall Street. Other more famous Wall Street manufacturers have begun to embrace Bitcoin.
SEC is embarrassed
Coinbase has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC), accusing the agency of acting arbitrary and capricious and refusing to establish rules to clarify regulation of the industry. Coinbase believes (in fact, this is the voice of most industry players) that the SEC’s behavior is undesirable by claiming to have power over crypto assets while refusing to formulate new regulations on how to handle these assets or clarify industry questions about cryptocurrencies.
When the SEC rejected Coinbase’s petition in last December, it didn’t offer much explanation as to why it wasn’t enacting regulations for cryptocurrencies, and the SEC declined to proceed with the rulemaking needed to create stability standards. This is the SEC’s current situation — its position is untenable and it doesn’t know how to deal with it, leaving industry players at a loss.
The SEC is unwilling to formally define what cryptocurrency securities are. This question has not been answered in any of the crypto rulemaking efforts provided by the SEC to demonstrate that it has a crypto policy in place. This is why the SEC failed miserably in the dispute with Ripple and Grayscale, which resulted in the spot Bitcoin ETF being approved for listing in January, 2024.
IMF stance reversal
On April 23, 2024, the International Monetary Fund (IMF) reversed its stance on Bitcoin, saying that amid global financial instability, Bitcoin has increasingly become a key channel for cross-border capital flows and is Necessary financial instruments.
The IMF pointed out in its report “A Primer on Bitcoin Cross-Border Flows: Measurement and Drivers” that investors in countries with strict financial regulations are turning to Bitcoin to move capital more freely across borders. In countries such as Argentina and Venezuela, Bitcoin has become a necessary financial tool to preserve wealth and access global markets, rather than just a speculative tool.
“In countries with high inflation, Bitcoin provides a way for individuals to protect their savings and participate in global commerce,” the IMF said.
Conclusion
However, if investors can invest for the long term and can withstand the risk of extremely low efficiency in early-stage startups, they are willing to accept the different eyes of others. Just like when you invest in stocks or any asset type that is now widely accepted, holding for the long term has now proven to yield astonishing returns over several roller-coaster price corrections. Let me stress again, what I mean by long-term is ten years.
Please note: Which type of investment asset can end well if it is short-term speculation?
Related articles
- “Enlightenment of Bitcoin reaching new heights“
- “Bitcoin ETF spot trading approval has far-reaching impact“
- “Cryptocurrency ETFs drive surge in related companies“
- “Investing in cryptocurrency is not as good as investing in related companies“
- “Incredible Bitcoin fanatical supporter, Jack Dorsey“
- “PayPal to buy cryptocurrencies is it not a good idea“
- “You should know the company Square (rebraned to Block)“
- “How do Coinbase and Binance make money? Advantages comparison“
- “How does BlackRock, the world’s largest index and asset management company, make money?”
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