The price of bitcoin set a new historical peak this week, surpassing the $48,000 level. The media, investors and speculators continue to pay close attention to what is happening with the world's largest cryptocurrency, asking themselves if and when this bubble will burst.
Meanwhile, more and more traditional companies and institutions are interested in bitcoin. In the past week, we learned that Bank of New York Mellon, which has $20 billion in annual revenue, decided to create a new unit to help clients maintain, transfer and issue digital assets. The new unit at BNY Mellon is expected to roll out offerings later this year. BNY Mellon's announcement came just days after it was revealed that Elon Musk-owned Tesla has purchased $1.5 billion worth of cryptocurrency and will soon accept it as a form of payment for its cars.
And in January, BlackRock Inc, the world's largest asset manager, added bitcoin as an eligible investment to two of its funds. This past Wednesday, credit card giant Mastercard Inc. announced that it plans to offer support for some cryptocurrencies later this year. So after a long period of avoidance by traditional financial firms, bitcoin has finally entered the mainstream. As a result, the largest virtual currency in terms of market capitalization has gained about 66 percent this year and is up 1,200 percent since mid-March last year.
The entire cryptocurrency market capitalization this week surpassed that of Google owner Alphabet, exceeding $1.4 trillion. Bitcoin itself has a capitalization larger than the Tesla stock market and is approaching the $900 million threshold, where the $1 trillion capitalization is already very close. It is also worth noting that in Google search, the phrase bitcoin appears less frequently in the Google Trend tool than in 2017. This could mean that either everyone has already heard about bitcoin, or that interest among individual investors is no higher than it was in 2017.
Since the start of this year, much of the price movement may be driven by institutional investors buying digital assets at a rapid pace, with Grayscale funds, the largest with exposure to cryptocurrencies, rising to over $36.6 billion. The further fate of the market may therefore depend on the continued adoption of bitcoin by institutions and companies, and how much willingness speculators have to take profits, triggering, for example, another 30% correction.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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