Bitcoin Institutional Adoption is Here to Stay even with High VolatilityFebruary 23, 2021
Precisely 12 months ago, the price of a single BTC token was 5000 USD. Presently, the same price stands at over 45000 USD and has the potential to climb even further. However, the same price is temporary and incredibly unstable at the same time. That means that like always, the price can take up a plunge in a matter of days if not hours. If that happens, the present 45000 USD can turn into 30000 or 20000 before the start of April. An event like that to many analysts seems just as likely as another record-breaking push towards 60000 USD.
But, even if that were to happen and the price became drastically weaker, the reasons for the recent surge in the value of the bitcoin network would still remain in place. Those are of course the numerous institutional investors who recently decided to join the cryptocurrency market. Their presents and potential are likely not going to fizzle out overnight, no avail the interests of other companies and major businesses disappear when it comes to owning bitcoin. The potential in that fact is enormous and also something that will likely define the future of the entire crypto domain in the 2020s.
Arguably, it all began with companies like Square and CEO of Twitter Jack Dorsey. As an avid crypto enthusiast, Dorsey frequently mentioned both bitcoin and the overall cryptocurrency phenomenon as very important elements of the modern experience. That modern experience is primarily related to the internet and its use by an ever-growing part of the global population. Even before the present level of mainstream recognition, Dorsey was willing to engage with the topics and numerous issues of the same technological and financial realm.
Unsurprisingly, the same translated to another company that he is involved with, Square, deciding to buy some cryptocurrency, more precisely BTC tokens. All of that occurred before the present overwhelming push from the numerous institutional investors. Back then, Square injected a now modest-sounding 50 million USD into crypto. But, it did so publicly and with the direct backing of Dorsey. The move turned out to be nearly prophetic.
Store of Value
The key reason why bitcoin is growing in price and market capitalization is that investors see it as a strong option for storing value. Many companies took the page from the Square playbook and decided to invest in bitcoin tokens. However, unlike Square, other companies decided to do it on a much higher level. MicroStrategy is probably the best example of that notion. During several funding grounds, this IT company invested nearly 1.5 billion USD into digital tokens. Other companies followed suit in 2021. Tesla is a prime example, which invested a similar amount of money as MicroStrategy but came out in the media with that announcement after the fact.
This quickly reverberated in the financial and business sectors, bringing even more companies in. As this took place, the narrative naturally pivoted away from the core concepts behind the same investment. These are almost universally all based on the idea of storing value outside of the traditional finance system. Instead, the media and the public perceive the decision as to the means of engaging in market speculation on an incredibly high level. But, even when the prices are going down, these companies are not selling their assets.
While the majority of the public is not receiving digital tokens as decentralized independent systems, these companies apparently are doing precisely that. They see the value and importance of having bitcoin and other people’s currency networks as independent entities that are unconnected to the wider financial landscape.
Instead, they possess a level of autonomy and uncorrelated basic values that make them a perfect candidate for a very dire need of many businesses in 2021. That need is one of creating hedges. Only by using these can companies ensure that they stand a chance of weathering the oncoming storm. The same storm brings only a single name but it’s one that makes most companies tremble in the dark. That name is simply inflation.
With the danger of inflation rising above every country in the world, it is no surprise to see companies scrambler every which way to figure out a means of protecting their assets. That, in particular, goes for their liquid funds which are in fiat currency, sitting on some bank account. Most likely the majority of them are holding the same assets in USD form. Already, the currency of the biggest economy in the world is doing pretty badly and chances are that the same trend will continue.
After all, the US Treasury has few options at their disposal which do not include printing and emitting more money into the market. From there, the only path is into the drastic inflation territory. Any business, no matter how big or small fierce inflation and does so righteously. Moving some of that liquid savings into crypto could be our tried and tested way of ensuring some protection against the worst brunt of inflation.
Adoption and Recognition
As BTC adoption, similar to things like esports, turns more widespread and this immediately or gradually drives up investor demand there are plenty of risks that companies will face. After all, transforming liquid assets into cryptocurrencies is likely just one means of protecting against inflation. The reason for that is that companies most likely fear the regulatory backlash that will almost certainly in some shape or form come in 2021.
With billions and billions of USD from huge international companies pouring into digital networks that are completely unregulated by any country in the world, the attention that these transactions get in mainstream media will include regulatory oversight as well. The involvement of legislative and regulatory bodies could dissuade some companies from investing, but only in the short term. In the long run, even some kind of regulatory environment would ultimately only further enforce the notion that cryptocurrencies for companies are an option that is here to stay.