Expectations Become Reality... Bitcoin Rises Again

Bitcoin Swayed by Words... Not Once Rising Over 4% in This Surge
Vague Expectations Materialize into Reality... Reality Creates New Expectations Again

[Asia Economy Reporter Gong Byung-sun] Bitcoin has been hitting record highs day after day, surpassing 74 million KRW. Although it dropped to the 62 million KRW range on the 25th, it has since successfully rebounded.

This record high is quite different from before. Despite no statements from specific individuals or particular situations, it broke previous highs and maintained an upward trend. In fact, from the 26th of last month, it rose for eight consecutive trading days without ever recording a single increase of more than 4%. Some cryptocurrency investors expressed mixed feelings, welcoming the market growth but puzzled by the lack of clear reasons. Except for this recent surge, Bitcoin has historically reacted strongly and reached new highs only when specific individuals or events emerged.

Bitcoin Rising on Someone's Words or Unique Actions

It is necessary to look back at what factors caused Bitcoin to rise when it reached certain price levels in the past.

On December 26 last year, Bitcoin rose 8.32% in a single day, marking the first time it reached the 30 million KRW range. The biggest reason was that business software company MicroStrategy made additional Bitcoin purchases. On December 21, 2020 (local time), MicroStrategy bought an additional 29,646 Bitcoins, bringing its total holdings to 70,470 Bitcoins.

In fact, MicroStrategy's additional Bitcoin purchase was not new news. Michael Saylor, MicroStrategy's CEO, had already announced plans to buy Bitcoin since October last year. Nevertheless, the reaction was bigger than when global payment company PayPal introduced a cryptocurrency trading system in October. MicroStrategy became the company holding more Bitcoins than the U.S. government. This raised expectations that institutional investors who could no longer be ignored by central governments might emerge.

On this day, Bitcoin rose 9.66%, breaking through 40 million KRW for the first time. There were two main reasons. First, U.S. President Joe Biden's Democratic Party achieved a "Blue Wave," controlling both the House and Senate. Expectations grew that liquidity from Biden's stimulus package could flow into the cryptocurrency market.

The other reason was the legal interpretation by the Office of the Comptroller of the Currency (OCC) under the U.S. Treasury. The OCC stated in an opinion letter that U.S. banks could process payment operations on blockchain networks like Ethereum. This meant banks could handle stablecoins pegged to fiat currency. This raised hopes that the cryptocurrency market could be integrated into the regulatory framework.

When Tesla disclosed its Bitcoin purchase, Bitcoin surged 17.05%, surpassing 50 million KRW. In December last year, Tesla CEO Elon Musk had called Bitcoin "useless," but he began changing his stance from January. He promoted Dogecoin, which was around 9 KRW, confidently predicting it would soon reach 1,000 KRW. On February 1, he also said on the audio-based social network Clubhouse that he should have bought Bitcoin.

Tesla's Bitcoin purchase announcement caused a huge stir. The company that attracted the most attention last year entered the cryptocurrency market. Tesla announced not only holding Bitcoin but also plans to allow Tesla products to be paid for with Bitcoin through disclosures. This raised expectations that other companies like Apple might follow Tesla into the cryptocurrency market.

Bitcoin ETFs began trading on the Canadian stock exchange, causing Bitcoin to rise 10.02%.

Although Bitcoin ETFs were launched in Canada, attention focused on the U.S. because of its large stock market. Expectations grew that Bitcoin ETFs could soon be launched in the U.S. Since 2018, asset management firms including VanEck have tried to list ETFs on the U.S. stock market but were rejected by the U.S. Securities and Exchange Commission (SEC). James Seyffart, a researcher at Bloomberg Intelligence, a research institution under Bloomberg, said, "The regulatory systems of the U.S. and Canada are similar, so the possibility of Bitcoin ETF launches in the U.S. stock market has increased." Hwang Se-woon, a researcher at the Capital Market Institute, explained, "The start of Bitcoin ETF trading on the Canadian stock exchange was an important turning point for Bitcoin's upward trend."

After President Biden signed a $1.9 trillion stimulus package, Bitcoin rose 6.02%. Contrary to expectations, the liquidity from the stimulus did not flow into the cryptocurrency market. On February 24, Bloomberg analyzed that the funds from the stimulus were directed toward the real economy rather than the cryptocurrency market. This was because people began consuming in the real economy as vaccination expanded.

Nevertheless, Bitcoin proved its value as a hedge against inflation risk. This was the moment when the expectations held on January 7 turned into actual value. It was also the moment Bitcoin demonstrated its real use to everyone. On February 7, George Ball, chairman of U.S. asset management firm Sanders Morris Harris, claimed, "Bitcoin is an attractive investment asset amid inflation." While the price of gold, a representative safe asset, fell more than 10% since the beginning of the year, Bitcoin continued its upward trend.

Bitcoin Rising Steadily Without Special Events... Vague Expectations Becoming Reality

Goldman Sachs announced on the 19th (local time) that its first-quarter revenue amounted to $6.34 billion, a 40% decrease compared to the same period last year. The photo shows Goldman Sachs stock being traded on the New York Stock Exchange. (EPA = Yonhap News) Photo by EPA

Despite no clear events, Bitcoin hit an all-time high. From major U.S. banks like Goldman Sachs to Morgan Stanley announcing plans to launch Bitcoin financial products, these news items had been circulating for some time. In other words, they were not entirely new. Goldman Sachs, which announced plans to launch Bitcoin-related financial products within the second quarter, had already been preparing to install a desk dedicated to Bitcoin futures investment and cryptocurrency trading since early last month. Earlier, on February 12, CNBC reported that Goldman Sachs had begun internal discussions about handling Bitcoin.

Morgan Stanley was even more explicit. On February 12, Bloomberg reported that Morgan Stanley Investment Management, an asset management arm of Morgan Stanley, was considering Bitcoin investment. Therefore, even though Morgan Stanley announced the launch of a Bitcoin fund on the 16th of last month, it did not significantly impact the cryptocurrency market. On that day, Bitcoin rose to the 68 million KRW range but declined again after February 18.

The launch of cryptocurrency payment systems was similar. PayPal announced on the 31st of last month that payments via cryptocurrency were possible. However, as mentioned earlier, PayPal is one of the most active companies in the cryptocurrency market. It introduced a cryptocurrency trading system last year and had announced plans to launch a payment system since early this year. Credit card company Visa also announced on the 29th of last month that it launched a cryptocurrency payment system in the U.S., but Visa CEO Al Kelly had been saying since January that cryptocurrency would be added to Visa's payment system. Tesla also announced it had established a Bitcoin payment system, but Bitcoin did not rise at that time.

However, the positive factors leading up to the breakthrough of 74 million KRW share a commonality: they realized vague expectations from the past into reality. Until now, Bitcoin was criticized for having no intrinsic value or being too volatile to be used as a payment method. Many institutions or companies showed only interest or consideration but rarely incorporated it into their businesses.

This time, various institutions and companies favorable to cryptocurrency have actually launched related financial products or built payment systems. They moved beyond mere speculation about Bitcoin's price range to create utility and practicality. This means Bitcoin's foundation has strengthened, increasing the possibility of reduced volatility. Above all, these created utilities and practicalities are generating new expectations again. CNBC has already predicted that Goldman Sachs and Morgan Stanley will compete in the Bitcoin financial product market. This creates a virtuous cycle that can build trust in the market.

Researcher Hwang said, "Unlike the past when a single word could cause big changes, the cryptocurrency market is steadily rising with direction. This is a desirable development, and trust in the cryptocurrency market is being built." He added, "There are still many expectations for cryptocurrency, such as the launch of ETFs on the U.S. stock market. If these vague expectations also become reality, it could form even greater momentum."

This content was produced with the assistance of AI translation services.