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Who is coming to help Bitcoin?

help bitcoin

August 31, 2021 | 

329 Views | 

Jesus Guzman | 

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In recent years, bitcoin has seen a dramatic surge in value to reach new all-time highs, although it has not been so steady. A group of retail investors in 2017 got interested in bitcoin and other cryptocurrencies and tried to figure out how to break through into initial coin offerings.

However, quasi-institutional forces have been helping bitcoin both in 2020 and 2021 and this is what has helped to increase the value of bitcoin. These forces include wealthy individuals, family offices, and hedge funds.

As bitcoin popularity continues to grow, institutional help is inevitably coming to help bitcoin from huge publicly traded companies around the world, central banks, and governments.

Although several governments and central bankers have been against bitcoin in previous years, there are breaks in the fabric of genuine institutional help for bitcoin.

Institutional investors facilitate the game

Whereas the trade figures for numerous individual investors have been deteriorating, more and more institutions have been climbing on board significantly. The reason behind this is that institutional investors involve considerably high trading volumes such that even if fewer trading partners were transacting in the digital currency market, the bitcoin industry could still sustain itself.

There are plenty of potential developments that are expected to take place in 2021 that could meaningfully affect institutional participation in the digital currency space.

For instance, if a cryptocurrency such as bitcoin was to be floated on the Nasdaq or another similar platform, it would experience a boost in reputation immediately. In turn, this would increase its value significantly.

Wall Street and the banking industry are not left behind

As the rate of adoption of bitcoin among corporations, investors, as well as fintech competitors continues to increase, the banking industry is being coerced into contending with bitcoin. According to crypto news, pressure is mounting on Wall Street banks to allow bitcoin as a genuine asset class and the pressure is mostly coming from within.

In a town hall meeting held in January 2021, employees of JPMorgan traders, the largest investment institution by revenue, asked when will they be involved in bitcoin.

To address this question, Daniel Pinto, the co-president of JPMorgan said that their decision would be based on whether a significant portion of their clients would like the banking firm to trade in bitcoin.

JPMorgan traders are not the only big banks that are crypto-curious. Goldman Sachs has been significantly considering using bitcoin and other digital assets beyond bitcoin. They have held private forums with Galaxy Digital, a huge crypto firm, to discuss how they intend to incorporate bitcoin in their institution.

Due to their critical role in the economy and their breadth of operations, banks usually face thorough regulatory scrutiny as compared to other financial firms. That said, banks have been greatly reluctant to participate in the crypto space, instead preferring to concentrate on similar technology such as blockchains.

However, if one or two of the largest banks were to embrace bitcoin, it would become an enormous stamp of legitimacy for the cryptocurrency world.

Wealthy hedge fund managers such as Stanley Druckenmiller and Paul Tudor Jones consider bitcoin's design is limited in supply and can be used as a hedge against the inflation and debasement of the US dollar.

Most of the clients who enquire about bitcoin are concerned with currency debasement. Thus, banks are looking for ways of matching bitcoin buyers and sellers for their clients, but they are considering ways in which they can integrate cryptos into their risk management systems.

What's Next for Bitcoin?

Whereas nation-states, central banks, and federal and central governments could take time before they adopt and buy bitcoin, a younger leadership generation in federated areas could help to drive up bitcoin as part of policy experimentation.

There is enough time that a new generation of regulators and politicians who are more bitcoin-friendly could take over when it reaches higher levels.

Numerous publicly traded companies such as Tesla and MicroStrategy have been embracing bitcoin too. As corporate treasuries begin to purchase bitcoin, publicly traded firms are going to begin purchasing bitcoin even though their line of business is not related directly with bitcoin - for instance, people who want to develop bitcoin exchanges and bitcoin mining companies.

Most of these migrations are spearheaded by founders – as seen with Twitter's Jack Dorsey and Square Crypto. In turn, this will help to create a soft floor for the price of bitcoin.

The benefits of publicly traded companies joining the crypto world go far beyond payments and institutional help. Jack Dorsey partnered with Jay-Z recently to fund a generous bitcoin development fund.

Also, Elon Musk has been supporting the general bitcoin ecosystem and there is a likelihood that in the future Tesla may accept bitcoin for their vehicles.

Using Tesla as an example case, their innovation of Lightning Network, Tesla micro-payments, and other innovative ways of processing micro-transactions might significantly help bitcoin.

It is expected that more entrepreneurs will join similarly as Elon – become involved with purchasing bitcoin first, then support the development of bitcoin innovations.

Sovereign Wealth Funds and Central Banks

Most of the leaders of sovereign wealth funds and central banks have condemned bitcoin instinctively because of the perception that it will. Most countries that are using bitcoin currently are those that were forced to it due to exclusion from the financial regime or global trade. For instance, countries that are sanctioned by the US like Iran and Venezuela.

However, there are hopes of experimentation with ideas such as decentralization using currency swaps, crypto regulation, and others.

There is a likelihood that as more localities continue to adopt bitcoin and more legislators begin to allow bitcoin contributions, there could be a change in the way in which regulators look at bitcoin, Coinbase, and other cryptocurrencies. Interestingly, in the mainstream adoption of bitcoin could be inevitable with the approval of central bankers or without it.

Just like several wealthy individuals do now, central bankers will consider cryptos as an asset class they cannot afford to miss regardless of their ideological convictions.

Wrapping it Up

The heyday of cryptos might have come and gone, but there is a possibility that the cryptocurrency market still has a lot to offer. Blockchain technology, which is behind several cryptos, has continuously spread far outside the digital currency space and is possibly going to be involved in new applications in 2021 and beyond.

It is worth noting how far the crypto boom can go if institutional help – regular purchases from cities, publicly traded companies, and eventually, pensions, sovereign wealth funds, and central banks - continue to accelerate and power the growth of bitcoin.

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