Greetings from MCS, the derivatives trading platform where traders ALWAYS come first.
Happy New Year!
I would like to start the first article in 2021 with my personal cryptocurrency trading story.
I first learned about the existence of Bitcoin in 2015, and I started trading Bitcoin in early 2016 when its price was at $200~300. (Oh, I miss the good old days...) I did not study the value of Bitcoin before trading, but rather jumped onto the market with the belief of "To The Moon".
Then, in 2017, the value of Bitcoin and many altcoins began to surge rapidly; so did the balance of my account and the self-esteem. At the time, the ICO Boom was also in place, so the question of which cryptocurrency to invest for a higher return was in everyone's mind, not the concern for any losses. The FOMO (Fear Of Missing Out) drove individuals to purchase and collect various cryptocurrencies without properly studying them, and the sky was the limit for the prices of cryptocurrencies. (Or So we thought...)
Were those prices mirages? The cryptocurrency market had experienced an unbelievable plunge in price from the end of January 2018, and it has left a deep scar in the mind of many traders, including myself. The flame of cryptocurrencies, including Bitcoin, which was believed to be an "Eternal Flame", was moving away from us, and the era of darkness had arrived.
Three years later, in 2020, Bitcoin is back in action and it is stronger than ever. It is "sexier" than 3 years ago. The rise, in the beginning, was slow yet steady, and it smoothly went beyond the previous high, and before we know it, the price of Bitcoin is above $33,000. Nevertheless, I do not feel the vibe where individuals are picking up all the coins they can find in FOMO. Certainly, the flame is not as hot as in 2017. I know this because I have not received calls asking about Bitcoin yet. Traditional and well-known investments such as real estate, stocks, and more, are attractive enough due to increased liquidity, and even individuals with experience in cryptocurrency investments are hesitant to re-enter the market due to the traumatic experience in 2018.
Even so, I keep investing in Bitcoin. In fact, my faith in the market is deepening beyond comparison with 2017. Do you think I should see a doctor? I will tell you why my faith in the market is deepening. Please read it through and tell me if I am sane or not. :)
The most fundamental reason! Bitcoin is back in a whole new outfit. When discussing the value of Bitcoin before, we believed in the logic that Bitcoin would establish itself as a future payment method and replace the current currencies around the world. Speaking of the payment method, Bitcoin is way too slow to become a proper payment method. Back in the day, short news about the increased number of stores accepting Bitcoin could drive the price of Bitcoin, but just how many stores actually accept Bitcoin now? If you have to spend 10 minutes to pay for a cup of java, who would use it? In fact, many people may laugh at using Bitcoin for real-time payments now, when the network complexity has increased.
However, Bitcoin's title was replaced from the "future" payment method and currency to “the next-generation leader in a store of value” in 2020. People no longer say that Bitcoin will replace the existing currency or finance with the power of transparency, or become the king of payments with the speed faster than light. Instead, Bitcoin is recognized as "digital gold" as the Bitcoin bull market continues.
Since 2020, the COVID-19 pandemic situation has continued. There is hope that the current situation will improve with the recent vaccine release, but so far, many people around the world are struggling with the COVID-19. To overcome this economic crisis, governments around the world are issuing government bonds and printing money. For example, in 2020 alone, the U.S. printed $3 trillion, and Trump recently signed another stimulus package to issue another $900 billion to boost the economy. The dollar will be supplied to the market more and more, so it will not be easy to defend against the depreciation of the USD.
We live in an era where currencies like the USD, EUR, YEN, and RMB literally overflow. Since the 2008 economic crisis started by Lehman, countries are pursuing quantitative easing by issuing additional government bonds at each economic crisis. Eventually, as the currency volume increases, so too does the worry about the currency's depreciation. No one will raise an objection to “gold” as one of the representative hedging tools to prevent a currency depreciation, and 2020 is a significant year to remark the recognition of Bitcoin as one of the representative hedging tools. How can we confirm this? Many institutions invest 5-10% of their asset portfolio in hedging instruments such as gold. It is called risk management. Now, some of these funds, devoted to hedging by these institutions have previously been concentrated on gold, are flowing into Bitcoin.
Is not this interesting? We think Bitcoin is an unstable asset due to its price volatility and legal ambiguity, but institutions perceive it as a safe asset that will preserve the depreciation of the currency. The acceptance of Bitcoin as a hedging tool by famous hedge funds, asset management firms, and insurance funds seems logical since Bitcoin has a fixed maximum supply and has no regional borders, unlike the existing currencies. However, the institution's entry into the Bitcoin market is still at an early stage. As time goes by, more and more institutions will show their interest in Bitcoin, and the increase in demand for Bitcoin with the limited supply will be expressed as a price surge.
Also, it is believed that the participation of individual investors will be further expanded. Although the current Bitcoin price has passed its previous high and is moving to a new high, the private investment market has not changed much from the dark period of the last 2-3 years. However, it is expected that participation in individual investment will increase further in 2021 when the price increases, Bitcoin's social status increases (institutionalized), and various financial derivatives based on Bitcoin launch. At the end of January 2021, Ethereum's ETF listing is also announced, so it seems that there will be a small twist and a big growth in the major cryptocurrency market.
In a market engulfed by institutions, it can be as difficult as traditional financial markets for individual investors to realize large returns. Even when the institutional entry is in its infancy, the value of Bitcoin is steadily rising. As a long-term investment destination, the current point seems an attractive entry point.
In 2021, we hope and pray that the cryptocurrency market, led by Bitcoin, which has been recognized by the general public as a risky and small speculative market, will complete its improvement and reach high.
Traders have suffered in 2020 so much. I hope this year's market will be a market with more smiles like in the second half of last year.
Again, have a happy and profitable new year everyone!
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