When he presented the creation of the digital currency, bitcoin as a “new electronic cash system” in 2008, which would be based on the blockchain method, a developer, with the pseudonym Satoshi Nakamoto, could hardly have imagined the exponential growth of his capitalization in the next years.
Bitcoin in the creation of many other cryptocurrencies (crypto) or digital currencies, which are not controlled by central banks, with their total capitalization reaching the high level of 3 trillion. dollars in 2021.
At that time, amid a pandemic and high liquidity that investors had from the fiscal support measures of governments in the US and elsewhere, the frenzy for the crypto market had peaked, with the price of bitcoin soaring in November of the same year close to $69,000.
The environment for the cryptocurrency industry subsequently worsened when the US central bank (Fed) halted its bond purchases and then turned to a tight monetary policy to tackle inflation, with continuous interest rate hikes from March 2022.
The price of bitcoin and other digital currencies took a sharp downward spiral, fueled by a series of scandals that hit the industry during 2022, culminating in the collapse of major cryptocurrency exchange FTX towards the end of the year and the conviction of its founder , Sam Bankman-Fried, for fraud.
The market capitalization of the crypto industry has shrunk in 2022 to close to 1 trillion. dollars, a third from the previous year’s high, a development that once again highlighted the huge swings in digital currency prices relative to those of other assets.
The price of bitcoin went into 2022 freefall near $15,000, meaning the largest cryptocurrency had lost nearly 80% of its value from its November 2021 high.
At the time, there were many who believed that bitcoin would enter a period of definitive obsolescence under the weight of scandals and measures taken by regulatory authorities in the US and other countries to regulate the industry.
This, however, did not happen, but instead bitcoin rebounded strongly last year, with its price hovering above $45,000 – last week it briefly approached $49,000 – an increase of over 160%.
Bitcoin had already gained a wider base in recent years, with large institutional investors, such as banks and funds mainly in the US, placing significant capital.
This fact gave bitcoin a relative “legitimacy” and at the same time perhaps explains the support it found to recover. With the decision of the US Securities and Exchange Commission (SEC) last Wednesday to approve the listing and trading on the major stock markets – New York Stock Exchange, Nasdaq and Chicago Derivatives Exchange – 11 investment funds (ETFs) based on the current (spot) price of bitcoin, crypto legalization has become absolute.
SEC Chairman Gary Gensler accompanied the approval of ETFs by noting that it does not mean the SEC endorses and supports bitcoin, which he said presents myriad risks for investors.
However, the bottom line is that acquiring bitcoin has now become much easier for retail investors, who will be able to buy shares in approved ETFs – run by large firms such as BlackRock – rather than going through the difficult process of buying bitcoins directly. which also has increased risks for them.
Given that ETFs track the current price of bitcoin, the investor could participate in profits from its rise or losses from its fall, without having to buy the cryptocurrency directly. In addition, bitcoin ETFs will now be able to be purchased by institutional investors, such as pension funds, something the SEC official expressed concern about.
Various predictions about how much the price of bitcoin will rise have already started to be made after the SEC decision, but this remains to be seen in practice as well as to what extent there will be new interest from investors, given the wide fluctuations in its price. .
Source: APE – MEB
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