In this article, I will briefly described the ins and outs of the bull market in the crypto market, and analyzed the specific causes and effects in depth.
Bitcoin he is back. Last month, the price of Bitcoin quietly broke through an all-time high, far surpassing the previous high of $19,600 in 2017, hovering around $36,000 at the time of writing. At the end of 2018, the price of Bitcoin dropped by nearly 90% from its higher point. This wave of Bitcoin's silent operation is called "quiet recovery" by many people. Perhaps the most interesting phenomenon of this kind of price trend, which has risen by nearly 1,000% from the March low, is "Everyone seems to be not very happy."
In the weeks after Bitcoin announced its three-year historical high, Katy Perry did not do the nail art of the Bitcoin icon. Floyd Mayweather did not launch cryptocurrency-related products in a high-profile manner. The New York Times did not publish an article titled "Everyone has wealth and freedom, but you do not." A Google search for "Bitcoin" is still well below its 2017 peak. Entrepreneurs continue to silently build financial infrastructure around encrypted assets, but basically the public has no longer cared about it.
So, when traditional knowledge is still comparing the king of Internet native currency to a tulip, what changes are quietly happening to Bitcoin? Technically, it's nothing. The last major update of the core protocol (the actual transfer rules of Bitcoin) was accepted by the community in July 2017. The latest update to the agreement is likely to be accepted by the community, but it improves privacy and efficiency. Even implementing these small changes to the agreement can take years.
From a technical point of view, the fact that “Bitcoin is quite static” is one of its most classic paradoxes: Although the creation of Bitcoin is a major technological leap, it combines and reorganizes cryptography, computer science, and economics. It is an important element in learning and peer-to-peer networks, but the protocol itself is indeed very rigid. As its anonymous creator Satoshi Nakamoto said: "Once Bitcoin version 0.1 is released, its core design will remain unchanged throughout its life cycle."
In the past three years, Bitcoin has not changed, but the world around it has changed.
I invest in various start-ups that support the core financial infrastructure required by Bitcoin and other public chains, which also allows me to clearly see the development process of crypto assets. Entrepreneurs who are committed to making the entire process of buying, holding, and trading cryptocurrencies easier have been looking forward to an opportunity to realize full cash. Today, it seems that this moment may be coming soon.
I believe that the current Bitcoin bull market is not a fluke, and there is no bubble.
For professional investors, there is no longer any professional risk in buying Bitcoin
This idea of completely stripping people’s freedom of decision from the monetary system is completely contrary to the way central banks operate today, so much so that Bitcoin has been severely criticized by many old-school economists.
Nevertheless, more and more people who did not believe in Bitcoin have become Bitcoin advocates. In the earliest days, it was venture capitalists and entrepreneurs who championed Bitcoin, like Mark Andreessen, Fred Wilson, and Chamath Palihapitiya. They are all based on their experience in software investment, so they understand the explosive potential of network effects. However, a group of new Bitcoin enthusiasts have emerged today: these veterans have decades of market trading experience, and they are more familiar with interest rates and various commodities than technology-based startups.
These hedge fund experts have recently clearly pointed out their reasons for allocating various assets. Bill Miller, the former CEO of Legg Mason, pointed out the unprecedented speed of printing money by the Federal Reserve and mentioned Bitcoin: "This is a technological innovation we have never seen before, and its It is being accepted by more people every day.” Stanley Druckenmiller, the investor who participated in George Soros’s blockade of the pound Compare it to gold and list its 12-year track record and growing credibility.
Hedge fund star Paul Tudor Jones, known for betting on currency pairs, said in an interview: "I have come to the conclusion that Bitcoin will become the best anti-inflation weapon-a defensive weapon. "So, if you think that governments and central banks around the world will eventually push inflation higher, keep Tudor Jones' analysis in mind, and you may find that you need to allocate some Bitcoin.
Those famous Bitcoin skeptics on Wall Street have now begun to reconsider their positions. Larry Fink, the CEO of BlackRock, who manages $7 trillion in assets, had previously been indifferent to Bitcoin. He now admits that Bitcoin may become a global asset and replace gold (a total value of nearly 10 trillion U.S. dollars) in investors' portfolios. JPMorgan CEO Jamie Dimon called Bitcoin a "scam" in 2017, but recently he changed his mind and started dealing with players in the crypto space . Ray Dalio, who runs the world’s largest hedge fund, no longer doubts Bitcoin. He said in a recent Reddit AMA: “I think Bitcoin (and some other digital currencies) have been in the past ten years. In the middle of the year, it has established its status as a gold-like alternative asset."
When the financial institution finally needed to make a decision, Bitcoin received a treatment it had never enjoyed before: no need to risk being fired to buy it. Grouping is very common on Wall Street. If you make a mistake that no one else has made, your career is over. But now on Wall Street, Bitcoin has begun to be regarded as an effective monetary asset, and analysts and traders can no longer have to suffer the "contempt of others" to buy Bitcoin. The full support of the widely respected commodity trader accomplished what Crypto Twitter could never do: make Bitcoin accepted in the world of financial giants.
All this indicates that institutional funds are pouring into the Bitcoin market
As recently as 2013, if you wanted to buy Bitcoin, the best option might be to transfer the money to an unregulated exchange in Japan, which was originally used to trade and sell Magic. (Unsurprisingly, this kind of exchange was hacked and hundreds of millions of dollars worth of Bitcoin were stolen.) Obviously, professional investors would not consider this kind of investment. Even when Bitcoin rose to $20,000 in 2017, very few institutional funds flowed into Bitcoin. At that time, Bitcoin's price surge was mainly driven by retail investors, who believed that their perception was beyond Wall Street, or used Bitcoin as a tool to invest in other tokens.
However, retail investors are often too sensitive to price changes. When prices started to fall in 2018, many retail investors sold their bitcoins and packed up their bags and continued on the road. In contrast, institutional investors—hedge funds, mutual funds, endowment funds, pension funds, insurance companies, family offices, sovereign funds, etc., those institutions that hold tens of trillions of dollars in their trading operations are More cautious. A huge change is taking place in the crypto world, and institutional investors are getting involved in Bitcoin for the first time in history.
The biggest reason for this progress is that in the past three years, Bitcoin's financial infrastructure has made tremendous progress, especially in terms of custody. In other words, if you are an institutional investor and want to buy some bitcoins, who will hold it for you? Unlike retail investors, institutional investors will not put digital assets in the devices in the desk drawers or go directly to Coinbase to trade through the iPhone app. Exchanges like Coinbase and Gemini of Winklevoss brothers, which are about to go public, were initially established mainly for retail trading of cryptocurrency, and did not consider the needs of institutions.
But since 2017, there have been many brokers and custodians with service agencies as the core: Coinbase launched Prime offering; my former employer, Fidelity, an asset management agency that manages trillions of dollars in assets, launched Fidelity Digital Assets focuses on institutional Bitcoin custody and transaction execution; many other "big players" have also joined the game. Pension funds, endowments and sovereign funds may not trust cryptocurrency exchanges, but they may trust familiar brands like Fidelity as their counterparties. The actual situation is this: Recently, NYDIG, a subsidiary of Stone Ridge, a $10 billion asset management company, facilitated the purchase of $100 million in Bitcoin by the insurance company Mass Mutual; at the same time, Coinbase helped Virginia-based enterprise software The company MicroStrategy bought and hosted Bitcoin worth more than $1 billion.
Therefore, a large amount of funds are being bought through convenient tools when there are reasonable reasons. Ruffer Investment Company, an asset management company with US$27 billion in assets, claims to be an "All-weather allocator," which allocated 2.5% of its portfolio to Bitcoin and explained: "Negative interest rates, extreme Monetary policy, ever-increasing public debt, dissatisfaction with the government-all of these when traditional safe-haven assets, especially government bonds are extremely expensive, undoubtedly provide a strong impetus for Bitcoin's success." December On the 16th, CIO Scott Minerd of Guggenheim Investments revealed in an interview with Bloomberg that his analysis showed that the value of each bitcoin is US$400,000, which is more than ten times higher than the current level. Moreover, you can be sure that there are more high-net-worth individuals, hedge funds, trusts, and family offices that are quietly deploying Bitcoin, but they will not explain any reasons on CNBC.
U.S. government regulation gives the green light
In addition to infrastructure issues, many investors are also cautious about Bitcoin regulatory issues. If you are an organization, if the assets you own will one day become illegal assets, then all this is meaningless. But in this regard, there is still a lot of good news for Bitcoin bulls. In the United States, the Office of the Comptroller of the Currency (Office of the Comptroller of the Currency), the bank's regulator, clarified that banks can store Bitcoin private keys for customers. With this policy, it is only a matter of time before large banks provide their customers with Bitcoin investment tools. You may not trust small cryptocurrency brokers, but you will almost certainly trust banks. In addition, the OCC recently awarded a professional "crypto bank" Federal Bank Charter called Anchorage, which paved the way for a closer connection between the traditional financial system and the cryptocurrency world.
In view of the fact that crypto startups have gradually entered the unfamiliar field of regulated banks, established banks have also seen opportunities for digital assets and have begun to connect with each other. As many entrepreneurs in the encryption field are familiar with, it was almost impossible to get involved with banking in the United States. Nowadays, as the crypto ecosystem is seen as an increasingly important market opportunity, many banks are vying to attract the attention of crypto companies. "Blockchain, not Bitcoin!" The mantra of Bitcoin opponents in 2017 no longer exists.
The Commodity Futures Trading Commission also expressed a clear view that “digital assets such as Bitcoin and Ethereum are commodities”, which paved the way for them in the regulated derivatives market and established themselves in the institutional investment portfolio. On the heels, trading Bitcoin and Ethereum is like trading oil, gold or wheat futures. The Chicago Mercantile Exchange launched Bitcoin futures products on December 17, 2017 (the highest point in the previous cycle), followed by options trading, and announced the launch of the second largest cryptocurrency, Ethereum futures product. The volume of open interest in the Bitcoin CME futures market has reached a record high in recent weeks. When a hedge fund such as the Renaissance with a scale of up to 110 billion US dollars participates in the game, no matter how long or short it is, it is often done through derivatives.
Bitcoin's new missionary
Perhaps the most active Bitcoin vocalist in recent days is MicroStrategy CEO Michael Saylor, who has allocated more than $1 billion in company assets to Bitcoin, making his company the first company to use Bitcoin as an asset Listed company with assets on the balance sheet. He did this because "compared to holding cash, Bitcoin has a higher rate of return and the value of Bitcoin is more secure."
Saylor shows its confidence in Bitcoin by allocating personal assets, corporate assets and issuing bonds, and spares no effort to promote the advantages of Bitcoin through podcasts and other media. He called Bitcoin "the most effective system in human history to conduct energy through time and space." He criticized the inflation in the traditional currency market, thinking that the problem was greatly underestimated; he referred to the US dollar cash assets held by MicroStrategy as "melting ice"; he called his Bitcoin position a cautious hedge Speculation is not above.
Although Saylor's statement may sound exaggerated, he did deploy Bitcoin for real money, which makes him qualified to evaluate Bitcoin as an asset. So far, Bitcoin's performance has not disappointed him: before the company announced that it would invest part of its reserves in Bitcoin, the price of MicroStrategy stock was about $120. The stock price is now close to $600.
Billionaires like Saylor, Fidelity's Abigail Johnson, and Twitter's Jack Dorsey are endorsing Bitcoin-once, shouting for Bitcoin Only those marginalized liberals and those encrypted anarchists. The topics repeatedly mentioned by new investors seem to be no different from what they have heard in the past. Bitcoin remained intact and sound even when the protocol was forked, loopholes appeared, and the exchange was hacked. Since its creation, Bitcoin has a record of nearly 100% normal operation, and has settled transactions worth trillions of dollars without a rollback. Under the traditional monetary system, it seems that the real interest rate reaches a negative value, and it may be further reduced. At this time, zero-yield monetary assets such as gold and bitcoin have new appeals. Many people who were once skeptical used Bitcoin's recovery from the 2018 crash as proof of its ability to be a store of value. In fact, the second recovery is more convincing. For the first time, it may arouse your interest, but you will be cautious about whether to buy something that looks like a bubble. The second time, you will realize that what you thought was a bubble is actually doing cyclical activities in a long-term trend.
Many people are upset about the dollar system
Bitcoin's rebound before 2017 is fundamentally different from the recent rebound: three years ago, Bitcoin's sharp appreciation benefited from its important role as the reserve underlying assets of the crypto industry (but the speed of the plunge and the rise of it As fast). This is a completely independent phenomenon, almost irrelevant to the outside world. In contrast, the essential reason for the Bitcoin rebound starting in 2020 is that people worry that the large amount of money printing and debt expenditures in countries around the world will lead to instability of the global monetary system.
The ravages of the new crown and the economic recession it caused have become a powerful excuse for central banks to speed up printing money to make up for fiscal deficits. As the world's most important central bank, the Federal Reserve has been extremely aggressive in monetary stimulus policies, which has led to a surge in the US money supply. At the same time, the status of the dollar has also been shaken for many investors. Measured by a basket of sovereign currencies, the US dollar rebounded in the spring of 2020, but experienced a long-term decline in the following period. Many U.S. dollar bears in the market see more and more U.S. debt on the market, but no one buys them. There are fewer believers in the U.S. dollar as a global reserve currency, and other major currencies also face their own problems.
This distrust of the U.S. dollar and concerns about the stability of the current global monetary system have made more people interested in Bitcoin. Bitcoin's predictable currency issuance policy toward zero has made it known as the strongest in the world. currency. Although there are many other anti-inflation hedging assets to choose from, Bitcoin also provides unlimited room for growth—just as you buy stocks in tech giants. In a sense, this can be regarded as a combination of two injections: a sound, insurmountable currency agreement and reserve assets in a rapidly expanding encrypted financial network.
Although this is a landmark year for Bitcoin, it still only occupies a small portion of global assets and is still accepted by fewer people. The Cambridge Alternative Asset Finance Center expects that the global crypto user base will be anchored at around 100 million people, or 1% of the global population. Bitcoin's current market value is $650 billion, which is only 2% of the 6% of the value of gold on the ground and US Treasuries. But at the same time, its market value has tripled in the past few months. Just like before, there will be someone who will come after the fact and point out that Bitcoin is risky. Personally, the story of Bitcoin is far from finished, and this revolutionary digital asset still has a long way to go.