Bitcoin experienced unprecedented growth in early 2021, reaching its highest level of over $ 58,000, almost three times the peak of the 2017-2018 boom. We are entering a time when institutions are starting to move to bitcoin (BTC), with many countries around the world printing unique amounts of money to service growing debt. To make matters worse, they also face uncontrollable inflation risk. This perfect storm of macro conditions means that institutions such as pension funds, hedge funds and wealthy people with a total value of trillions of dollars are starting to take an interest in and learn about Bitcoin for the first time.
In contrast to the bullish trend in 2017, this current trend is not so much driven by the hype addict as by the recognition of Bitcoin as a rare asset class in the traditional financial world. The adoption of cryptocurrencies by companies and institutions has been a major theme in 2021 when Tesla invested $ 1.5 billion in Bitcoin, one of the most striking examples of corporate adoption to date.
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In addition, large organizations recognize the importance of Bitcoin as a valuable asset, and many add millions of dollars in assets to the balance sheet, including Goldman Sachs, Standard Chartered, Square, BlackRock, Fidelity Investments, MicroStrategy and others.
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But the cryptographic landscape needs to change to really let Bitcoin enter the traditional world. Institutions may not use private keys that are easily lost, complete transactions with long letters and numbers or store funds on exchanges with high counterparty risk.
Organization is important
New cryptocurrency rules in the United States make it easier and more acceptable to have cryptocurrency while providing greater trust across jurisdictions. Just last month in the United States, the Comptroller’s Office provided much-needed regulatory assurance on cryptocurrency activities. Acting Currency Controller Brian Brooks stated that access to blockchains such as Bitcoin or Ethereum, ownership of coins from these bars directly or on behalf of customers, and work under a public blockchain contract are permitted. In other words, it allows banks to be actively involved – an important step towards improving the comfort level of institutions interested in storing cryptocurrencies.
We also see new developments in the service and management of digital assets, so that more organizations and companies can enter this space. Goldman Sachs recently sent a request for information to investigate the bank’s plans to have digital assets as part of a broader strategy to enter a stable foreign exchange market. Although details have not yet been confirmed, these seismic actions from key organizations are driving the firing.
A new generation of cryptocurrencies
While these institutions have large teams to manage and monitor their new cryptocurrency assets, smaller companies have also begun experimenting with adding bitcoins and other cryptocurrencies to the balance sheet. As companies, both large and small, begin to own cryptocurrencies, it is becoming increasingly clear that the next generation of companies will act as investors who hold and balance money across multiple asset classes.
This includes companies whose core businesses are not crypto and blockchain, which dramatically changes the corporate value proposition: all are now a fund whose income can be disconnected from the core business proposition. Small companies that could only own cash, investors are now worried about liquidity. In the developing world of decentralized financing, the complexity of asset management knows no bounds; You can buy and sell financial derivatives, participate in lending and more.
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I envision a future where all companies will have cryptocurrencies on balance, and each company will be an investor, whether or not this is their most important business proposal. But that future depends on both user experience and rules. Some companies and organizations that own cryptocurrencies are willing to take the risk of discovering their own operational and financial security measures to manage the cryptocurrencies, while for others this is not the beginning. The traditional world will require storage solutions, traditional UX for transactions, cryptocurrency management and more.