SINGAPORE: Bitcoin’s record rally seen in recent weeks was partly driven by the entry of larger institutional investors into the market, according to PwC’s global cryptocurrency leader Henri Arslanian.
The digital currency rose more than $ 30,000 for the first time on Saturday and had advanced more than 300 percent by 2020, Reuters reported. On Monday afternoon in Asia, Bitcoin traded around $ 32,668.93, according to CoinDesk.
The cryptocurrency has been around for just over a decade, but last year it only began to rise in popularity among major institutional investors. Cryptographic stock exchanges have said that bitcoin is seen as a hedge against inflation, similar to gold.
“When you look at this bitcoin rally that we’ve seen in the last couple of weeks and months, there really are two big elements driving it. One is the continuous influx of institutional players,” Arslanian told Monday on “Street.” CNBC’s Asia Signs. “
The resurgence of Bitcoin prices last year was partly fueled by well-known Wall Street billionaires who publicly supported the cryptocurrency. Analysts said his endorsement gave confidence to otherwise skeptical conventional investors. Investors such as Paul Tudor Jones and Stanley Druckenmiller have put money into bitcoin and pointed to its potential as a hedge for inflation.
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Big financial companies like PayPal and Fidelity have also made moves in cryptocurrency while Square and MicroStrategy have used their own balance sheets to buy bitcoin.
Arslanian said he expects this trend to continue over the coming months, noting that there are now several instruments that allow institutional players to expose themselves to bitcoin. “But there are also a lot of regulated players. That wasn’t the case a couple of years ago,” he said.
A second development driving the current bitcoin rally is retail investors and the fear of getting lost, according to Arslanian. He said that today there are many more people who have accounts in cryptocurrencies than before, as buying cryptocurrencies is easier now than before.
“With these two big elements driving it, there’s a big boost in space. There’s also a lot of optimism in the crypto markets,” he said.
Bitcoin’s recent performance recalls its frantic recovery to near $ 20,000 in 2017, which was followed by a sharp decline in 2018, which ended with billions of dollars in the market capitalization of major cryptocurrencies. But crypto enthusiasts say the current concentration is different, as it is driven by institutional buying rather than retail speculation.
For his part, Arslanian said that a big difference between this rally and what was seen in 2017 is the clarity of the regulations, which was then scarce. Today, he said, most regulators around the world have people working on internal cryptography. Many of the large financial centers have “fairly good regulatory clarity in the crypto markets and this provides comfort, not only to institutional investors, but also to retail investors who also reach the market,” he said.
Although Arslanian refused to set a price target on Bitcoin for this year, he said the current momentum remains optimistic. “More than the price of bitcoin, I’m seeing the number of new institutional players coming in, which I think has an excessive impact on the markets,” he added.
– CNBC’s Ryan Browne contributed to this report.