Bitcoin & Crypto becoming mainstream?2 Apr 2021 16:32
Is bitcoin going mainstream and should you buy in?
Last week, US Federal Reserve chair Jerome Powell made his views on bitcoin clear: it’s “an asset for speculation”, one that “is essentially a substitute for gold rather than for the dollar”, Powell told the Bank for International Settlements’ digital banking conference. Nor is it “a useful store of value” because of its volatility.
Powell’s comments are perhaps unsurprising. You wouldn’t expect the governor of the world’s most important central bank to say: “rush out and buy bitcoin”. Yet his views are not necessarily shared by Wall Street, with the likes of BNY Mellon and Goldman Sachs taking bigger steps into the area of cryptocurrencies in general.
It’s little wonder that institutions are becoming more interested. Bitcoin has now been around since 2008; in that time it has survived several boom and bust phases, and in each boom phase, people have potentially made a lot of money.
Today, despite all the scepticism, it remains trading close to its recent all-time high of $61,644, thanks to a search both for inflation hedges (given the scale of public debt and money being printed by central banks) and, for returns in a low-interest rate environment coupled with frothy equity and bond markets, points out Anthony Hardy, research analyst at Franklin Equity Group.
So are cryptocurrencies becoming mainstream – and should you invest?
Banks are turning bullish on crypto
Mainstream adoption of cryptocurrencies is growing fast. Since the start of the year, several big banks have embraced crypto. Goldman Sachs, for example, reintroduced plans to launch a cryptocurrency desk for futures trading.
It’s not alone. Just a few months after America’s oldest bank – Bank of New York Mellon – announced it will roll out a new digital custody unit later this year, Morgan Stanley became the first bank to give its wealth management clients access to three cryptocurrency funds, according to CNBC.
Meanwhile, in a 108-page report published in February (which came in for some criticism), Citigroup gave bitcoin a big endorsement, saying that it “may be optimally positioned to become the preferred currency for global trade”.
It is not just the banks who are increasingly endorsing crypto. Tesla’s Elon Musk started accepting bitcoin as payment for cars earlier this month, just a few weeks after Tesla shifted $1.5bn into bitcoin.
The crypto rally has also captured the attention of individual investors who view bitcoin as a potentially better hedge against inflation than traditional hedges such as gold, primarily because bitcoin has a fixed long-run supply of 21 million coins, compared to central banks’ ability to print as much fiat currency as they like.
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