Bitcoin Is Back
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Things are cheap in crypto right now: Bitcoin is back to around $20,000 and gas fees on the Ethereum network are at record lows. Despite this, though, retail investors are not taking advantage of the price plummet. Discouraged by the recent price falls and the negative narrative coming from global regulators, they are staying firmly away. Most are either selling or not moving, waiting it out until prices rise. But why buy expensive when you can buy cheap?
You know who is buying cheap, though: institutional investors. Over the past week, over 80% of bitcoin’s trading volume has been taken up by institutions that are queuing up to short the world's biggest cryptocurrency. According to CoinShares’ weekly, over $51 million of inflows went into BTC short funds between June 27 and July 1, with institutions betting big against what was envisioned as, and truly should be, the people's currency.
Meanwhile, in sharp contrast, we see a bitcoin event in the UK aimed at educating families and young people on digital currency that includes goat petting and bitcoin basketball. This is a truly by the people for the people grassroots event and represents everything that crypto was supposed to be.
As we can see, cryptocurrency has flipped on its head. What was a grassroots movement designed to be a challenge to the power of corrupt institutions has been taken over by those institutions that are profiting at the expense of retail investors. It is a sad situation to see play out for those of us who have been here watching and supporting from the beginning.
Globally, inflation is getting out of hand at a rapid pace. A quick google of “inflation” will show that there is almost no country in the entire world that is not facing record-high inflation right now. Switzerland is facing inflation not seen for 29 years, while Turkey and South Korea are facing inflation at 24-year highs. And in the US, we have warnings that already recording-breaking price spikes are set to get much worse over the coming months. This is a shaky time for everyone, not least as it seems so out of our control.
Bitcoin has been frequently touted as an investment that would protect purchasing power. For those that bought at 2021 price levels, this is not yet playing out. For others that bought at different times, it has proven true. As we know, in the fast-changing world of cryptocurrency, a strong ROI can turn on a dime.
But, while we can’t say Bitcoin has protected purchasing power over the past 12 months, we can certainly say it has over two years or more. Since July 2020, the world’s biggest cryptocurrency is up 131%: annualized growth of 52%, while since July 2017, it is up 826%, representing annual growth of 56%.
Indeed, cryptocurrency remains truly the only place where average savers and investors have any chance of preserving and growing their wealth. While decentralized finance is not offering the yields it used to, using stablecoins in this ecosystem continues to deliver returns far in excess of those available in comparable products in traditional finance.
While cryptocurrency and blockchain find themselves somewhat maligned right now, they remain the only spaces that are innovating and seeking solutions to structural financial challenges. Meanwhile, regulators and institutions continue to back and perpetuate a broken monetary system that benefits only them. This is the same cycle over and over and the institutions are the ones who yet again come out on top.
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