Will Bitcoin Reach a Point of No Return Given the Rise of Institutional Investors into the Market Mix?
In a recently released article by the Financial Times, they discuss how Bitcoin (BTC) hit an all-time high in terms of the Argentine peso (ARS) in the last 12 months. Some analysts claim that this is a victory for Bitcoin, but this is not the case. Other fiat currencies such as the dollar, the Japanese yen and the Euro currently outperform digital assets as a store of value.
Argentine Peso or Bitcoin?
It is possible to see that Bitcoin has recently reached an all-time high in ARS after it surpassed AR$350,000 per coin a few days ago. The community was very excited about this “achievement” because it showed how Bitcoin was growing and surpassing fiat currencies in terms of usability and as a store of value.
If an Argentinian had bought Bitcoin at the highest point of the "biggest bubble in history", in 2017, he would have been better off than leaving his money in his Argentinian bank account. So tell me again how Bitcoin is a horrible store of value. pic.twitter.com/55YuAi9vD4
— Josu San Martin (@josusanmartin) May 19, 2019
However, during the last 17 months, inflation in Argentina surpassed 60%. That means that the recent all-time high that Bitcoin reached in AR$ terms is still far from being a real all-time high. In mere nominal terms we Bitcoin was able to surpass its previous all-time high in AR$ but it is clearly far behind inflation rates. Argentinians storing Bitcoin at its all-time high in December 2017 would have around 40% less today in real terms.
Comparing Bitcoin to the worst performing currency after the Venezuelan Bolivar is not something that Bitcoin maximalist should be proud of. As Bitcoin was just able to reach an all-time high in AR$, during the last 17 months, the AR$ itself performed better than Bitcoin. Even when the AR$ lost a large portion of its value, it is still used as a unit of account, while Bitcoin fluctuates every single day and it cannot be compared to other fiat currencies in this area.
That does not mean that Bitcoin is not useful and that the digital asset has no real-world use cases. But comparing Bitcoin to one of the worst performing fiat currencies in the world is not something that Bitcoiners should be showing off.
Moreover, there were some individuals claiming that Bitcoin’s trading volume in LoclaBitcoins was increasing. Indeed, Bitcoin trading volumes in USD terms have fallen substantially in Argentina from December 2017 to December 2018. In December 2017, Bitcoin trading volumes fell from $330,000 to $200,000. Argentina seems to follow a similar trading pattern as developed countries that is driven by speculation rather than by need.
In this graphic, BTC trading volume in the country increased from AR$ 5,728,457 in December 2017 to AR$ 7,694,852 a year later.
This is an increase of 34%.
However, during the same period of time the USD grew 121%.
Dec ‘17: $330,000 USD
Dec ‘18: $200,000 USD
— Carlos Terenzi (@CarlosTerenzi) April 18, 2019
Nonetheless, Bitcoin trading volumes have been increasing during the last month, showing that there is a growing bullish sentiment in the market.
Mati Greenspan, a senior market analyst at eToro, commented:
“Last night’s breakout was a clear testament to the amount of momentum this market currently has and though we certainly might see a wider pullback, there are many who still think we’re just getting started on the next parabolic move.”
There are several companies, institutions and individuals that want to enter the crypto market and this seems a very good moment to do so. A few weeks ago, the Chicago Mercantile Exchange (CME), registered an all-time high trading volume for its Bitcoin futures. Investors were able to close 33,677 contracts.
Even when these futures contracts are settled in cash, they also reflect increasing excitement from institutions. There are more investors that want to have exposure to the most popular digital asset, even when there are just a few platforms that allow them to do so.
This is why it is not a surprise that Fidelity Investments and the Intercontinental Exchange (ICE) are working in order to bring crypto services to institutions and larger investors that want to have exposure to the market. Earlier this year, Fidelity Investments published a report in which they explained that they expect new investments from institutions in the crypto market.
One of the main factors that will help companies enter the space is related to recognized and secure custody solutions. This infrastructure is currently being built by different firms and companies that want to be the first ones in this market and offer solutions to larger and traditional investors.
As mentioned before, Bitcoin has currently a very positive sentiment that seems to be allowing it to grow and reach new highs in over 8 months. Since April, the most popular digital asset was able to expand over 100%, showing that the market could be entering a new bull trend that could reach new all-time highs in the future.
There are several experts and analysts that suggest that as Bitcoin is going to be halving next year, the price of the digital asset is expected to increase due to a lower issuance of new BTC. At the same time, the inflation that the network is going to have will be reduced to 1.8% per year during the next four years.
Although Bitcoin needs to improve many things yet, the digital currency is attracting investors from different countries and backgrounds. As more investors enter the space, Bitcoin is going to keep growing even further in the near future.
At the time of writing this article, Bitcoin is being traded around $8,730 and it has a market capitalization of $154 billion. In the last 24 hours, Bitcoin shows no change in its price. Other digital asses such as EOS grew 12.34% during the last 24 hours.