Tech writer, literature-enthusiast, music-lover
Our identities have no bodies, so, unlike you, we cannot obtain order by physical coercion. We believe that from ethics, enlightened self-interest, and the commonweal, our governance will emerge.
The only law that all our constituent cultures would generally recognize is the Golden Rule. We hope we will be able to build our particular solutions on that basis. But we cannot accept the solutions you are attempting to impose.
From A Declaration of the Independence of Cyberspace
The Gold Narrative in Coded Money
Crypto assets were born out of a disastrous financial storm. People who cast doubts and sarcasm about traditional financial markets were eager for a drastic change in the existing financial system. The central banks that once understood as justified gatekeepers to the macro-economy and everyone’s money-pocket, since then struggled to re-establish their place in the emerging crypto market.
“Negative interest rates, extreme monetary policy, ballooning public debt, dissatisfaction with governments — all provide powerful tailwinds for bitcoin at a time when conventional safe-haven assets, particularly government bonds, are perilously expensive.”
Bitcoin is born out of code. Except for its transactional utility executed by programs, its core value lies within a compound of advantages that combines the features of digital “good currency” and “gold”, which are portable, divisible, scarce, durable, and most important, value consensus. Beyond which, Bitcoin is exceptionally decentralized, publicly accessible, censorship-resistant, and secure (for user purpose).
In November 2020, billionaire investors Bill Miller and Stanley Druckenmiller confirmed their holdings of Bitcoin and recommended it to the public as a promising investment asset in the long-term. They compared it to gold, with Millar emphasizing that he believed it would resist against the inflation caused by Federal Reserve’s money-pouring policy.
A Citibank analyst has predicted that BTC may reach $300K+ and referred to the digital asset as “21st century gold” in a leaked note to clients.
The consensus reached on Bitcoin value does not rely on any national or institutional credits, but pure codes, which will initiate transaction orders once the conditions are met, without external interferences. As the Declaration says, public address, aka. the identity in crypto space has no physical shape and is natively free from physical coercion.
However, Bitcoin transaction is limited among Bitcoin holders only, as to differ from the fiat money that is backed and supervised by the states. Therefore, the “currency value” of Bitcoin is more commonly used in the dark market for all kinds of digital trading or illicit trading activities, due to its quasi-anonymous characteristic.
Therefore, as for most Bitcoin holders, Bitcoin is held more as a store of value.
Most fetishes in Bitcoin today focus on its strong value-reservation attribute. The price growth naturally attracts more investors. Bitcoin holders consist of a diversified group, including cyberpunks who earned a great fortune via early mining, and late followers who were initially skeptical about its value, but took a great stride forward in investment when having witnessed the growth parade.
Since the U.S Federal Reserve announced QE measure on the 15th of March this year, shrewd Wall Street investors and capable individuals resolutely turned to Bitcoin and ETH as non-correlated investment portfolios, which is promising to hedge against the inflation risks.
In the Fidelity survey, nearly 80% of institutional investors said they find something appealing about digital assets, that is uncorrelated to other asset classes (36%), is an innovative technology play (34%), and has a high potential for upside (33%).
Who Has Been Ensuring the Price Climax for Bitcoin?
Let’s check out the whales that created the great Bitcoin Gold Pool in 2020. By Whale, I mean those who made large-scale transactions of over 1,000 BTC each.
An upward trend in the number of transactions of between 1,000 and 5,000 BTC has been witnessed from the end of March, following the price plump in March that almost gave every crypto-holder a heart attack.
A new purchase climax was reached at the beginning of August. At least 20 institutions have shown strong interest in leading cryptocurrency investment, including Grayscale, Microstrategy, Galaxy Digital Holdings, Square, etc.
These emerging institutional investors mainly range from hedge funds, traditional asset managers, retail organizations, and family offices, who have been looking for a higher ROI of AUM against inflation risks. That’s why they chose Bitcoin.
But how did they purchase it?
Both MicroStrategy and British investment firm Ruffer have revealed that their purchases of hundreds of millions of dollars worth of bitcoin were facilitated by Coinbase.
Microstrategy, a technology consultant service provider, made its initial purchase of $21,454 Bitcoin on the 11th of August 2020. Currently, it has increased to more than 38,250 BTC assets under management (AUM), whose value surged to $731,282,625 at the time of writing. The company has treated BTC as its primary reserve asset, which outperforms the rest of its earnings.
From a shareholder point of view, the main benefit of MicroStrategy investing in bitcoin was a better risk-reward profile compared to holding pure bitcoin.
Grayscale differs in the path when investing in Bitcoin. Grayscale launched its Bitcoin trust in September of 2013 — GBTC. It holds a huge pool of Bitcoin. It opens public access to trade shares in GBTC, with each share tracking the near-enough price of BTC. GTBC shares operate like stocks and bonds, which provide tax-paying conveniences for investors.
The owner of Grayscale is also the parent company of CoinDesk, a news site specializing in digital currencies.
What role the regulatory body plays in the cryptocurrency market？
Traditional investors now have easy access to Bitcoin and ETH investment products without having to pay the custodian costs as in the traditional financial market, the tax. They don't even have to purchase Bitcoin or ETH, but still can benefit from the surging price via GBTC or GETH.
In OCC’s (Office of the Comptroller of the Currency) interpretive letter in July 2020, OCC claimed to have acknowledged the difference between custodial services for fiat money versus cryptocurrency, noting that because digital currencies exist only on the blockchain or distributed ledger, there is no physical possession of the instrument.
Therefore, a bank “holding” digital currencies on behalf of a customer will take possession of the cryptographic access keys to that unit of cryptocurrency.
In the meantime, an increasing number of tax authorities have been proposing explicit crypto tax guidance as to the market demand skyrockets. But still, it might only work for institutional investors, who has been looking for a higher level of monetary security under custody while interacting with crypto advisers for investment opportunities. As for miners and DeFi traders, the identities behind them are nearly impossible to track.
But the true value of Bitcoin is still yet to be proved beyond investment. Everyone’s curious to see what will happen to the digital giant, and how it will respond and cope with the new U.S government after 30th Jan of 2021.
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