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Bitcoin Faces an Emerging Identity Crisis

The more attention Bitcoin (CCC:BTC-USD) receives from Wall Street, the worse of an investment it appears to be on Main Street. That’s because as the largest cryptocurrency becomes mainstream, it is more likely to face regulatory action. Or put another way, it’s all fun and games until the “suits” get involved.  

A concept image showing Bitcoin (BTC) in a bubble.
Source: Shutterstock

Think I’m being hyperbolic? Then consider remarks by Ben Hunt, chief investment officer at Second Foundation Partners. Hunt expressed his belief that Bitcoin in the mainstream dilutes its original use case.  

Hunt’s views were expounded upon in a recent article by Samuel Wan on NewsBTC when he wrote “The leading cryptocurrency was founded on the principles of being permissionless and censorship-resistant. In short, a way to stick it to the establishment.”

Wan went on to write that Hunt views that Bitcoin may be facing an identity crisis as Wall Street begins to use Bitcoin to serve its own ends. Perhaps the most alarming of Hunt’s comments was thus: 

“… what made Bitcoin special in the first place is nearly lost, and what remains is a false and constructed narrative that exists in service to Wall Street and Washington rather than in resistance.” 

Cryptocurrency in general has always faced a conflict between institutional investors and the crypto evangelists. The latter point to the blockchain technology that underpins most cryptos. This is the one thing that makes Bitcoin and other altcoins, such as Ethereum (CCC:ETH-USD), so valuable. Bitcoin also offers investors the benefit of scarcity as only a finite number of Bitcoin will ever be created.

This scarcity rationale was a perfect counterpoint to the lack of fiscal discipline by our government. However, the volatility of cryptocurrency has largely been the reason it failed to get mainstream acceptance. Now it seems that might be changing. Traders just want to make money. And cryptocurrency is an asset class that can provide that.  

Mark Hake has an insightful take on why Bitcoin could be trading at $100,000 by the end of the year. I’m not disagreeing. All I’m saying is it may come with strings attached.  

A Social Dilemma 

Bitcoin bulls and bears engage in a circular debate that is important, but irritating. The reason is that neither side can “prove” their case. So I’ll add my own thoughts to the argument.  

The fact that more institutional investors are becoming attracted to investors is like when parents started to go on Facebook (NASDAQ:FB). Just like that, Facebook became the social media space that teenagers and young adults sought, and still seek, to avoid.  

The argument was, if Facebook is a platform that “old people” engage with than it was too establishment for them. See ya Boomers!  

Having said that, there is no evidence of a mass exodus right now. Despite its recent drop, Bitcoin is still up about 94% for the year at the time of this writing. And no less than Mark Cuban is advocating Bitcoin as a store of value that’s more practical than gold 

But institutional interest is relatively new. And with about $140 billion in the currency that is inaccessible, likely forever, I think we’re reaching a point where we find out how people really feel about Bitcoin.  

Will Bitcoin Be Banned? 

The threat of banishment seems to be one of the current bearish arguments against Bitcoin. Some of this is getting sparked by investors such as hedge fund manager Ray Dalio. And the Turkish government has already taken steps to outlaw Bitcoin.  

However, if you’re concerned about this, then you shouldn’t be investing in the cryptocurrency. In fact, a concern like this seems countercultural to the whole spirit of investing in Bitcoin.  

Bitcoin has its true believers. There are also those with legitimate concerns. That’s because, as I mentioned in a prior article, Bitcoin is still maturing. And there’s a possibility that it may not live up to its increasingly high expectations.  

But anybody that says they “know” that Bitcoin is a good investment at $50,000, at $70,000, or at $5,000 is not being honest. 

That’s the nature, and probably the definition, of a speculative investment. Which is all you really to know about Bitcoin.  

But no risk, no reward, right?  

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.  

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2021/05/bitcoin-faces-emerging-identity-crisis/.

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