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Bitcoin rose to 49,000 US dollars and hit a new high: where is the upper limit? Wall Street investment banks are still watching

After Tesla revealed that it had purchased $1.5 billion in bitcoin, the price of bitcoin soared.

At 8:15 on February 12th, Beijing time, Bitcoin rose above US$49,000 per coin, a record high.

Where is the Bitcoin price ceiling?

Song Jiaji, Dean of Guosheng Securities Blockchain Research Institute, stated that Bitcoin, as a fast-growing asset, not only has the characteristics of a commodity (similar to gold) but also carries the hope of emerging blockchain technology (similar to stock market Internet technology companies). Therefore, Bitcoin can move out of an independent market independent of commodities and stocks.

However, Bitcoin, as an emerging asset, also has some risks: With the development of financial derivatives such as institutions bringing a large number of funds into the market and Bitcoin futures, the price of Bitcoin still has the risk of violent fluctuations; the regulatory level of various countries is becoming increasingly tight. The government’s supervision and a crackdown on anti-money laundering, tax inspections, and fiat currency transactions are also increasing.

Wall Street is on the sidelines of Bitcoin

Analysts are currently discussing whether Tesla’s high-profile move will have a knock-on effect and whether the CFOs of other listed companies will also make similar investments.

Royal Bank of Canada Capital Markets analyst Mitch Steve wrote that Apple may be the next company to venture into cryptocurrencies such as Bitcoin. He believes that if Apple develops its Apple Wallet into a cryptocurrency exchange, then it may create a new growth market.

JPMorgan Chase strategists said that due to the huge volatility, other large companies are unlikely to follow Tesla’s example and include Bitcoin in their assets.

At the same time, JP Morgan strategists also pointed out: “No matter how many companies eventually follow Tesla, this week’s statement will undoubtedly change the recent trend of Bitcoin, push up the inflow of funds, and help Bitcoin to exceed $40,000.” How long it will last may depend on whether institutional funds enter the market.

Several major Wall Street investment banks are still on the sidelines.

According to reports, JP Morgan Chase has accepted the Bitcoin exchange Coinbase Inc. And Gemini Trust Co. For bank customers, this is the first time the bank accepts customers in the cryptocurrency industry, but the service does not extend to any transactions based on Bitcoin or cryptocurrency.

Can Bitcoin replace gold and become a safe-haven asset?

Zhao Wei, a chief macro officer of Open Source Securities, believes that Bitcoin currently does not have the attributes of hedging; however, because it can perform some general equivalent functions and the quantity is relatively scarce, the price of Bitcoin actually implies the expectation of becoming a global “value-preserving currency”, Which tends to rise sharply during the large-scale release of mainstream central banks. Bitcoin can currently replace official currency in some countries for commodity purchases and financial transactions. At the same time, the upper limit of the number of bitcoins is locked at 21 million, which is more scarce than gold. In this context, Bitcoin is considered to be expected to become a global “value-preserving currency” that can hedge against risks such as the US dollar.

Whether Bitcoin can truly become a global “value-preserving currency” is closely related to the development of digital currency and changes in regulatory policies. Bitcoin’s current legality is not widely recognized, and it is in a grey area of ​​law and regulation in most countries. At the same time, more and more central banks have actively participated in the research of legal digital currencies, and the People’s Bank of China will be the first to pilot official digital currencies in 2020. For Bitcoin, whether it can obtain legal status and not be replaced by a digital currency endorsed by national sovereignty will directly affect its long-term price performance.

Zhao Wei said that gold and U.S. bonds can become high-quality safe-haven assets due to the ability to hedge against the decline in risk appetite and features such as low volatility, high liquidity, and large market value. Compared with risky assets, the “haven attribute” of gold and other hedging assets is mainly reflected in the ability to hedge against the decline in risk preference. For example, when U.S. stocks adjust sharply, prices of gold and U.S. bonds often rise. Among the safe-haven assets, the lower the volatility, the higher the liquidity, and the larger the market value, the higher the quality.

Compared with safe-haven assets such as gold, Bitcoin has high volatility, poor liquidity, and very small market capitalization. Looking back on historical data, and during the period of drastic adjustment of risky assets, Bitcoin often falls simultaneously. Historical data shows that Bitcoin and gold frequently deviate from trends, and there is no stable correlation with the VIX index, which measures risk appetite. Since 2018, the U.S. S&P 500 Index has undergone three drastic adjustments, with declines of 8.5%, 19.1%, and 33.7% respectively. During the same period, Bitcoin has fallen sharply by 21.6%, 37.5%, and 32.4%, which is far worse than gold. Safe-haven assets.

In the short to medium term, with the accelerated recovery of the global economy supported by vaccines and the expected rise in the withdrawal of mainstream central bank policies, Bitcoin price fluctuations may increase. Bitcoin’s sharp rise in the past few months is closely related to the “draft” of mainstream central banks. However, looking forward to the future, the large-scale promotion of vaccines, stock replenishment, and fiscal stimulus will accelerate the economic recovery of the United States and Europe; during the economic recovery process, rising oil prices may cause inflation expectations to rise sharply around the second quarter, raising mainstream central bank policies to withdraw expected. On the whole, the volatility of Bitcoin prices may increase.

Some countries’ recent policies on digital currencies

Nigeria: On February 8, 2021, the Central Bank of Nigeria banned the trading of cryptocurrencies such as Bitcoin and other digital assets, and instructed local banks to immediately close the accounts of those customers connected to cryptocurrency exchanges. This move is only a reminder that cryptocurrencies are not Fiat currency.

Spain: On February 5, 2021, the Spanish National Tax Administration issued guidelines to reduce tax evasion of cryptocurrencies such as Bitcoin. Due to the “tax risk” created by the hype in the crypto market, the Spanish Ministry of Finance is seeking measures to resolve it.

Israel: Also concerned about taxation issues. On December 23, 2020, the Israeli tax authorities are issuing a notice to the country’s cryptocurrency holders, requiring them to fully disclose their cryptocurrency holdings so that they can be taxed accordingly.

China: On February 4, 2021, the Ministry of Industry and Information Technology announced that it will organize the application of pilot demonstration projects for the development of the big data industry in 2021, including encouraging the innovative application of big data in the financial sector, such as risk management and digital currency.

On December 29, 2020, the 16th plenary meeting of the 12th Beijing Municipal Committee of the Communist Party of China stated that it will increase investment in new infrastructure in 2021, implement the “ten hundred thousand” project for digital economy application scenarios, and build blocks. Chain service platform, start the construction of legal digital currency pilot zone and digital financial system.

On December 25, 2020, the Central Bank issued the “Technical Framework of Distributed Database Technology Financial Application Specification”, “Distributed Database Technology Financial Application Specification Security Technical Requirements”, “Distributed Database Technology Financial Application Specification Disaster Recovery Requirements”.

United States: On December 24, 2020, the United States SEC announced that digital asset broker-dealers operating under certain circumstances will not be subject to SEC enforcement for the next five years. The “specified situation” means that the broker-dealer needs to keep the security tokens as its business focus, and conduct due diligence on network security and disclosure to customers, including ensuring that each potential customer knows that the broker-dealer involved is dealing with digital asset securities.

Switzerland: The first phase of the Swiss Blockchain Act, which covers company reforms, takes effect. The implementation of the new regulatory model will help improve the rapidly developing cryptocurrency and blockchain fields in Switzerland. The second phase is expected to take effect this summer, and the second phase will provide legal support for crypto trading operations.

Serbia: On December 29, 2020, the “Digital Assets Law” came into effect, allowing the issuance and trading of digital assets and related services. The new law states that Serbia’s digital asset service providers can operate after “obtaining a license from the regulator”.

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