Bitcoin on the Rise Again... What Risks Should We Consider?

Bitcoin Up About 25% in October
Possibility of Powell and Gensler Reversing Stance... Volatility May Decrease as It Enters Institutional Sphere

[Asia Economy Reporter Gong Byung-sun] The upward trend of Bitcoin, the representative cryptocurrency, is showing signs of significance. The price increase is interpreted as a result of the possibility of institutional adoption, mainly in the United States. However, there are also concerns about risks and limitations inherent to Bitcoin.

According to the domestic cryptocurrency exchange Upbit, as of 9:36 a.m. on the 8th, Bitcoin recorded 65.82 million KRW, up 0.49% compared to the previous day. It rose to 67.29 million KRW the day before but has since shown some hesitation.

However, looking at the broader picture in October, Bitcoin has shown a tremendous upward trend. On the 1st, it was only in the 53 million KRW range, but it rose about 25% within a week. The day before, Bitcoin's market capitalization again exceeded 1 trillion dollars (approximately 1,190.7 trillion KRW). This is the first time since May 11 that Bitcoin's market cap has surpassed 1 trillion dollars. Altcoins, which refer to cryptocurrencies other than Bitcoin, are also showing similar trends to Bitcoin.

Positive Developments Continue in the U.S. Institutional Sector... Cryptocurrency Industry Recommends Small Investments

[Image source=Reuters Yonhap News]

The United States is behind Bitcoin's upward trend. Key figures in U.S. financial authorities have been making favorable remarks about Bitcoin day after day, raising expectations for institutional adoption. On the 30th of last month (local time), Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), stated at a House Financial Services Committee hearing, "We will not block cryptocurrency trading like China." This contrasts with China, which has strongly regulated cryptocurrency-related companies and investors since May this year.

Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), went further by suggesting that Bitcoin-related financial products could be launched on the U.S. stock market. On the 29th of last month, he expressed at a House Financial Services Committee hearing that he hopes the SEC's relevant department will review documents related to Bitcoin exchange-traded funds (ETFs).

As investors are paying renewed attention to the cryptocurrency market, the industry recommends investing in the relatively stable Bitcoin. Although it has led the domestic cryptocurrency market with tremendous volatility, sometimes rising several times in a day, it is technically incomplete and only accepted domestically. An industry insider said, "We recommend periodically investing small amounts in Bitcoin," adding, "Although its history is short, its issuance is limited to 21 million, so it will serve as a safe asset like gold due to its scarcity."

Risks Still Exist... Possibility of U.S. Institutional Position Reversal

However, concerns about risks still remain. The market tends to overreact to statements by influential figures, such as Elon Musk, CEO of Tesla, who attracted attention in the cryptocurrency market earlier this year. In fact, both Chairman Powell and Chairman Gensler were negative about cryptocurrencies just a few months ago, so there is a possibility their positions may change again. In July, Chairman Powell said, "If the U.S. introduces a digital dollar, Bitcoin will become useless." Chairman Gensler also focused more on investor harm caused by cryptocurrencies until last month.

There are also contradictions inherent in cryptocurrencies themselves. Since they were created with purposes such as decentralization and anonymity, their value may decrease as they become part of the institutional sector. Professor Lee Byung-wook of Seoul School of Integrated Sciences and Technologies said, "If Bitcoin ETFs are launched on the U.S. stock market, investment channels will diversify, and many investors will increase," adding, "If institutionalized, the volatility that is one of the reasons for investing in cryptocurrencies now will disappear."

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