2020 was in many ways an unpredictable year for bitcoin. DeFi or Decentralised finance, attempting to replicate traditional financial functions on public blockchains, began to gather momentum and many institutional investors began to look at bitcoin as a serious store of value. In addition, the bitcoin halving took place in May 2020 in which mining reward dropped from 12.5 bitcoin per block to 6.25 bitcoin per block. Cryptocurrency is a global phenomenon. The trends that happen globally affect Malaysian traders and investors as well.
Here’s a review of events of the last year and a look at upcoming cryptocurrency trends.
Institutional Investors Continue to Flock to the Bitcoin Space
Institutional investment in bitcoin was the headline news of 2020. Companies both big and small moved portions of their cash reserves into bitcoin, including MicroStrategy, Mass Mutual, and Square. Subsequently, bitcoin reached its all-time high (ATH) creating renewed excitement reminiscent of bitcoin’s initial ATH in 2017.
Furthermore, cryptocurrency and investment platforms, such as Luno, are already making it even easier for institutions to get involved. The recent news that the S&P Dow Jones Indices will debut cryptocurrency indexes in 2021 should put cryptocurrency in front of even more investors on a daily basis.
It is something that has actually been spoken about for the longest time. However, 2020 appeared to be the tipping point — the year when institutions really started to invest significant amounts of money into cryptocurrency. We expect this trend to continue in 2021.
The Participation of Sovereign Wealth Funds
On a similar note, will sovereign wealth funds be ready to make public investments into bitcoin in 2021? The Norwegian Government Pension Fund, also known as the Oil Fund, now owns almost 600 Bitcoin (BTC) indirectly through its 1.51% stake in MicroStrategy.
This is a show of trust that could encourage further investment in cryptocurrency. If institutional investment brought mainstream respectability to bitcoin, imagine what the backing of a sovereign wealth fund or government would do?
Bitcoin to Enjoy More Investments From the Retail Market
A close look at recent Google Search Trends reveals an interesting finding, the price of bitcoin managed to achieve its latest ATH without reaching the level of consumer curiosity in 2017. This is driven fundamentally by institutional demand rather than retail demand.
We believe a continued increase in media attention would certainly change this but perhaps even more important is that it’s now easier than ever to buy bitcoin. Not only there are platforms such as Luno that are supporting customers around the world, but also the likes of PayPal and Square are seeing huge success in the United States.
Bitcoin owners still constitute a small fraction of the global population and there is still room for growth. A booming digital asset, mass media attention, and easy access for everyone would be a potentially impactful combination.
The Real Impact of Bitcoin Halving Kicks In
The 2016 bitcoin halving is widely credited with sparking the bull run that culminated in December 2017’s previous ATH. Many stakeholders anticipate a similar trajectory when the bitcoin halving in May 2020 saw block rewards fall from 12.5 to 6.25 bitcoin. As a result, the price of bitcoin has increased steadily ever since. Are we set to follow the same trajectory as December 2017?
There is no easy answer to that question. The cryptocurrency space has changed since 2017. There is also a range of other macroeconomic considerations to consider, particularly the COVID-19 pandemic. Nevertheless, should it follow the same trajectory again, there are huge possibilities.
Encouraging Bitcoin Participation in Malaysia
For all of 2020, we signed up more than 80,000 new customers. In just the first month of 2021, we are seeing thousands of new customers signing up on a daily basis due to their interest in investing in bitcoin. FPX instant deposits were launched back in October 2019 and its volume has now increased eight-fold since the first month.
As cryptocurrencies and digital assets gain further traction, they will continue to attract attention from regulators. Progressive regulations are crucial for the healthy growth of any industry. We hope regulators will continue to balance the need for rules with space for innovation to happen.
We are looking to aggressively expand our education and awareness programmes in Malaysia. Despite all the hype, less than an estimated 2% of the world’s population owns cryptocurrencies. We will continue working with multiple partners to help bring cryptocurrencies to the mainstream.
Broadly speaking, the global pandemic has nudged large numbers of people into using technology, and by extension cryptocurrency, more than ever. This is clear in the explosive growth of digital services such as e-commerce, streaming, and video conferencing. We believe it has accelerated the adoption of online financial services as well which includes cryptocurrencies and digital assets.
The views expressed are solely of the author and do not necessarily reflect those of Money Compass.
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