Translation of the Full Article
Bitcoin has hit a record high, breaking its previous peak of late 2017 when cryptocurrency memes swept all across the South Korean Internet spaces. Bitcoin is rising not only as a decentralized financial means of avoiding government regulation and big bank fees but also as a future “store of value”.
Key Summary: A number of experts claim that current bull market is different from 2017, when young, speculative investors mostly from South Korea and China led the bubble. Along with the record-low interest rates and ample liquidity in the market, institutional big names such as BlackRock are revising the value of cryptocurrencies as new digital assets part of their portfolio.
Bitcoin Reboot: Bitcoin is a cryptocurrency built upon blockchain, a distributed database composed of entries encrypted and confirmed by all participants in the system. Unlike legal tender backed by central governments, bitcoin transactions are verified and confirmed by decentralized computers. This decentralized encryption eliminates the possibility of fraudulent entries, as it is very difficult to alter all ledgers already recorded in the network.
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The bitcoin price hit $19,850 last Monday, exceeding the previous peak and marking a 170% year-to-date growth. From May to September bitcoin was traded around $10,000 but has risen sharply since late September. Investors saw a $5,000 jump in bitcoin prices just over the past three weeks.
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Back in 2017, many young, first-time investors in South Korea jumped into the cryptocurrency market often with heavy borrowing. The frothy market became a cultural phenomenon, with the new slang “leggooooo(가즈아)” widely used both in mocking and cheering wishful, speculative mentality of these novice investors.
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A number of experts say the current bull market is different from the frothy market of 2017 led by speculative, individual investors mainly in East Asia. Major financial institutions have begun to consider bitcoin as one of the major digital assets that might be comparable to gold in the future.
Why Bitcoin is Rising Again: These three factors are contributing heavily toward the recent spike in bitcoin prices: ample liquidity in global financial market, a weak dollar and reevaluation of Bitcoin itself.
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Ample Liquidity: Governments and central banks around the world have pumped up money to fight the pandemic recession, plunging the cost of borrowing. Just like money is pouring into real estate and stock markets, excess capital is also flowing into bitcoin.
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A Weak Dollar: Fed is keeping its federal funds rate target near 0%, increasing amount of dollar in circulation and lowering the value of dollar. Investors looking for ways to hedge their exchange rate risks are flocking into alternative assets like gold and commodities. Some investors have started to view Bitcoin as one of those alternative assets.
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Reevaluation of Bitcoin: BlackRock, the largest asset manager in the world, and Goldman Sachs are discussing a new joint venture in China focusing on cryptocurrencies in partnership with local banks. Fidelity is not only serving Bitcoin customers but also mining them on its own. Citibank projects Bitcoin prices can shoot up to $318,000 in the coming years.
What’s keeping Bitcoin from becoming a real currency: The volatility. Bitcoin prices fell by 10% just in a single day on November 27. A currency with that huge of a gap in value is hard to be accepted as a real medium of exchange of goods and services. It’s still a very risky investment, too. Bitcoin’s value is solely dependent on the faith of market participants. Nonetheless, many expect Bitcoin to be the pioneer of decentralized finance (De-Fi). Eric Schmidt, the former chief executive of Google, said, “Bitcoin is a remarkable cryptographic achievement. The ability to create something which is not duplicable in the digital world has enormous value.”
