Many headlines explore the idea that Bitcoin (CCC:BTC-USD) could run to six figures in 2021.
Recent events have sent crypto markets plunging. Government actions from several countries have taken some wind out of cryptos’ sails. Yet, Bitcoin has at least one catalyst that should continue to push it higher.
That said, Bitcoin prices dropped to a three-week-low below $55k on April 17 and April 18. The news comes as wider speculation of a crypto bubble mounts.
Nations Taking Action
Turkey has made it be known that it will ban cryptocurrencies as payment. The country’s central bank cited excessive volatility and concerns that cryptocurrencies may be used for illegal activity. It also pointed to cryptocurrencies’ lack of regulation and supervision by a central regulatory authority.
Well, yes. That last point is the exact argument crypto bulls favor. The blockchain allows people to collectively regulate and supervise a given cryptocurrency rather than relying on a centralized authority to do so for them. If a given cryptocoin has fair governance protocols underpinning it then there’s an argument to be made favoring them.
So, while news like this will cause Bitcoin to decrease in price, it’s at least worth reflecting on the question of whether one’s respective central bank ultimately serves the people it was designed to.
That goes for individuals in every country, not just those in Turkey. Roughly a month ago, a Reuters article outlined India’s proposed bill against cryptocurrencies. The nation’s policy would be very austere according to the article:
If passed it “would criminalise possession, issuance, mining, trading and transferring crypto-assets, said the official, who has direct knowledge of the plan.”
Ray Dalio was quoted as saying there’s a “good probability” that the U.S. may outlaw Bitcoin. He likened it to what happened with gold in the 30s.
“..because cash and bonds were such bad investments relative to other things, there was the movement to those other things, and then the government outlawed them (gold)”
More broadly, nations across the globe are scrambling to understand the ramifications of Bitcoin as it takes off. Overall though, news like that from Turkey will continue to drag prices down.
But what might drive prices up for Bitcoin? One thing to consider is that Bitcoin, as much traction as it has gained, is still a fringe asset. Make it act more like a stock and it suddenly becomes more attractive.
Bitcoin ETFs are a logical step that would bring Bitcoin to the familiar trading ground of stock markets.
The recent listing of Coinbase (NASDAQ:COIN) makes this all the more possible. There are several Bitcoin ETFs vying for approval that have applications filed with the SEC. Experts believe VanEck and WisdomTree (NASDAQ:WETF) are most likely to gain approval.
That’s all well and good, but the point here is the importance of a Bitcoin ETF in bringing Bitcoin further into the fold of mainstream finance.
Once a Bitcoin ETF is added to the markets Bitcoin will effectively trade as a stock. It will then be possible to buy into its growth without purchasing Bitcoin through a crypto exchange.
That will open up a realm of entirely new investors into the asset. Namely institutional investors who will be much more open to investing in the familiar vehicle of an ETF. Institutional investors are simply much more influential than their retail counterparts. The point here is that a Bitcoin ETF really has the potential to raise the cryptocurrencies’ price above that vaunted $100k threshold.
There is clearly pressure on Bitcoin pulling its price in both directions. My opinion is that cautious optimism is the best route forward.
I don’t believe Bitcoin will be outlawed any time soon, if ever. It’s deeply entrenched as is, and ETFs are going to further increase its entrenchment in the financial system. I believe it’s going up and it will soon be more accessible to powerful market influences.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”