SINGAPORE – The record Bitcoin rally seen in recent weeks was partially driven by the entry of more large institutional investors into the market, according to PwC global cryptography leader Henri Arslanian.
The digital currency rose more than $ 30,000 for the first time on Saturday and advanced more than 300% in 2020, Reuters reported. As of Monday afternoon in Asia, Bitcoin was trading at about $ 32,668.93, according to CoinDesk.
The cryptocurrency has been around for just over a decade, but it only started to grow in popularity among major institutional investors last year. Cryptographers say bitcoin is seen as a protection against inflation, similar to gold.
“When you look at this bitcoin rally that we’ve seen in the past few weeks and months, there are actually two big elements that drive it. One is the continued entry of institutional participants,” Arslanian told the “Street Signs” channel on Monday. CNBC Asia. “
Bitcoin’s resurgence in price last year was partly fueled by well-known Wall Street billionaires publicly supporting the cryptocurrency. Analysts said his endorsement gave confidence to conventional investors, who would otherwise be skeptical. Investors like Paul Tudor Jones and Stanley Druckenmiller put money in bitcoin and pointed out its potential as protection against inflation.
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Major financial companies like PayPal and Fidelity have also made moves in the cryptocurrency while companies like Square and MicroStrategy used their own balance sheets to buy bitcoins.
Arslanian said he expects this trend to continue in the coming months, noting that there are now several instruments that allow institutional agents to expose themselves to bitcoin. “But there are also a lot of regulated players. That was not the case a few years ago,” he said.
A second development that drives the current bitcoin boom is retail investors and their fear of losing, according to Arslanian. He said that many more people today have accounts in cryptocurrencies than before, since buying cryptocurrencies is easier now than before.
“With these two big elements that drive it, there is a lot of momentum going on in space. There is a lot of optimism in the crypto markets too,” he said.
Bitcoin’s recent performance is reminiscent of its frantic rally to nearly $ 20,000 in 2017, which was followed by a sharp downturn in 2018, eliminating billions of dollars in the market capitalization of major cryptocurrencies. But crypto fans say the current boom is different, as it is driven by institutional buying, not retail speculation.
For his part, Arslanian said that a big difference between this rally and that of 2017 is the clarity of the regulations, which were scarce at the time. Today, he said, most regulators worldwide have people working on encryption internally. Many of the big financial centers have “very good regulatory clarity on the crypto markets and this is giving comfort, not only to institutional investors, but also to retail investors entering the market,” he said.
Although Arslanian refused to set a price target for bitcoin this year, he said the current moment remains optimistic. “More than the price of bitcoin, I am watching the entry of new institutional players, which I believe has an extraordinary impact on the markets,” he added.
– Ryan Browne of CNBC contributed to this report.