The price of bitcoin is irrelevant
The price of bitcoin is irrelevant to the evolution of its market. I wrote about it in February, and still stand by my statement today. Since then, the bitcoin price has risen about 150 percent but has also been up over 300 percent, and down 40 percent from this local peak.
Price fluctuations in this young market are living their own lives, but at the same time, the underlying infrastructure is growing steadily.
Ten years ago, the idea for Bitcoin and cryptocurrency was sent to an email list of tech-geeks. At the end of September, ICE, the owner of the world’s largest stock exchange, sent an email saying that an ICE-platform for trading bitcoin has opened. This platform is called Bakkt, and it has a daily and monthly settlement of financial contracts directly in bitcoin.
There is no doubt that the bitcoin price fluctuates drastically, and is often in the double-digit percentage change in a single trading day. The volumes are still small and the market can often be categorized as immature.
Question of when, rather than if
It has been difficult to say whether the value of bitcoin will stabilize, but with ever better services and products, this is becoming a question of when, rather than if. Namely, with Bakkt’s new contracts, you can secure your positions daily and eliminate the risk of fluctuation. It is optimal for players who want to offer their customers the use of bitcoin, such as Starbucks, which is also one of the main investors in Bakkt. They are in good company with Microsoft and Boston Consulting Group, which are also important investors.
Developments in Europe are also taking place. Boerse Stuttgart, Germany’s second-largest stock exchange, recently opened its new cryptocurrency exchange, another regulated marketplace that allows you to exchange traditional currency directly against bitcoin.
SIX, the leading stock exchange in Switzerland, has launched the prototype of its new cryptocurrency exchange and already has several crypto products on the traditional exchange.
The fact that established financial players are investing in cryptocurrency is a development we are beginning to see in Norway as well. The launch of the Norwegian crypto exchange Norwegian Block Exchange is imminent, and test users have already gained access. After Sparebanken Øst bought a share of the company, this may be the first way to get cryptocurrency directly through a bank in Norway.
Bitcoin to reach $90,000 next year
The German bank BayernLB, with over a third of Germany’s largest companies on the customer list, is also starting to dip its toes into the crypto market. The bank came out with hard-hitting news, announcing that it believes the bitcoin price will reach $90,000 next year . Of course, this seems quite distant to many, but it is based on the fact that valuing bitcoin as an asset follows a principle of scarcity in the same way as gold.
Given that the number of bitcoin produced annually will be halved in May next year, a price increase may be more likely than one thinks since the price is determined by supply and demand. With a lower supply, the price will go up, all else being equal.
What is important to remember, however, is not the price estimate itself, but that financial institutions take bitcoin seriously, invest in infrastructure, and produce analyses the same way as for other assets.
DeFi on the rise
It’s not just stock exchanges and banks that are jumping on board. Morningstar, rating and investment research company, will now look at cryptocurrency. They have tremendous influence around the world with their financial services, and Morningstar Credit Ratings CEO, Michael Brawer, says new cryptocurrency credit rating services could help move parts of the giant credit market into a decentralized financial network.
Decentralized finance is growing rapidly, and Morningstar can help make the crypto market far more respected and credible for skeptical investors.
Development will not be stopped by price fluctuations
Maybe the bitcoin price has dropped some percent as of publishing this article, or skyrocketed, but if you are concerned about the short-term fluctuations, you lose understanding of what is about to happen. This is still an immature and volatile market, but huge companies and enormous resources are now investing in the development of a whole new financial infrastructure on and around cryptocurrency and open blockchains.
This trend will not be stopped by price fluctuations, bitcoin’s history is clear evidence of that. A lot has happened with the crypto market over the first ten years, but it’s in the next ten that the development really will accelerate.
As with the rise of the internet in the 1990s, I think there are few that really understand what big changes lie ahead.
Originally posted in the Norwegian newspaper Dagens Næringsliv.