The BlackRock Trust: Crypto Legitimacy or the Beginning of the End for Bitcoin?
After BlackRock, the largest asset manager in the world, announced on Aug. 11 that it will launch a private bitcoin trust for its clients, some crypto enthusiasts said the move could legitimize the digital asset in the eyes of more traditional investors.
BlackRock’s new private trust will make bitcoin available to its institutional clients, tracking bitcoin’s performance, offering direct exposure to the price of the cryptocurrency, and of course, trading options.
“Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities,” BlackRock said in its press release.
The news comes shortly after the firm announced a partnership with Coinbase to provide clients of its Aladdin platform access to cryptocurrency trading and custody services. These developments highlight how traditional investors and institutions from banks to hedge funds are moving into the crypto market, indicating that digital assets are here for the long haul.
These fresh endorsements lend crypto ever-stronger legitimacy, bringing digital assets into the more traditional financial industry and therefore making them more accessible to both new and old investors.
But does advocacy from a multinational investment-management firm goes against everything Bitcoin originally stood for? Especially when, just five years prior, BlackRock CEO Larry Fink called bitcoin an “index of money laundering.”
Bitcoin’s anarchic beginnings in 2009 heralded the potential democratization of finance. Blockchain technology promised a more open and secure approach to currency for everyone. So with bitcoin now trending in mainstream Wall Street investment portfolios, has the leading cryptocurrency betrayed its revolutionary roots?
At the end of June, Coinbase’s stock was at its all-time low of $47.02. But the announcement of BlackRock and Coinbase’s partnership may be partly responsible for the recent upward trajectory of the crypto exchange’s share price.
But Coinbase shares are still down 75% from their peak, and online skeptics feel BlackRock’s partnership with the once top-of-its-game Coinbase is nothing more than a power grab by a centralized financial institution.
And with the added possibility of new regulations from U.S. Congress, the news further fuels fears that the current crypto winter is not fleeting, but the beginning of the end for Bitcoin.
As is always the case with the market, only time will tell.
Bitcoin's Price History
Among asset classes, Bitcoin has had one of the more volatile trading histories. The cryptocurrency’s first significant price increase occurred in 2010 when the value of a single bitcoin jumped from just a fraction of a penny to $0.09.
The cryptocurrency has undergone several rallies and crashes since it became available. This article offers insight into Bitcoin's volatility and some reasons why its price acts the way it does.
Since it was first introduced, Bitcoin has had a choppy and volatile trading history.
As an asset class, Bitcoin continues to evolve along with the factors influencing its prices.
Bitcoin was designed to be used as currency in daily transactions.
While Bitcoin is still a cryptocurrency, investors have also used it to store value and hedge against inflation and market uncertainty.
Due to the growing interest of investors, economists, and governments in Bitcoin, other cryptocurrencies began to be developed around 2017.
The price changes for Bitcoin reflect investor enthusiasm and dissatisfaction with its promise. Satoshi Nakamoto, the anonymous Bitcoin inventor(s), designed it for use in daily transactions and as a way to circumvent traditional banking infrastructure after the 2008 financial collapse.
Cryptocurrency gained mainstream traction as a means of exchange. It also attracted traders who began to bet against its price changes. Investors turned to Bitcoin as a way to store value, generate wealth, and hedge against inflation. Institutions worked to create Bitcoin investment instruments.
Bitcoin's price fluctuations primarily stem from investors and traders betting on an ever-increasing price in anticipation of riches. However, Bitcoin's price story has again changed. In January 2022, Bitcoin began losing steam.
Bitcoin had a price of zero when it was introduced in 2009. On July 17, 2010, its price jumped to $.09.
Bitcoin's price rose again on April 13, 2011, from $1 to a peak of $29.60 by June 7, 2011, a gain of 2,960% within three months.
A sharp recession in cryptocurrency markets followed, and Bitcoin's price bottomed at $2.05 by mid-November.
The following year, its price rose from $4.85 on May 9 to $13.50 by Aug. 15.
2012 proved to be a generally uneventful year for Bitcoin, but 2013 witnessed substantial gains in price. Bitcoin began the year trading at $13.28 and reached $230 on April 8. The equally rapid deceleration in its price followed, bringing it down to $68.50 a few weeks later on July 4.
In early October of 2013, Bitcoin was trading at $123.00. By December, it had spiked to $1,237.55 and then fallen to $687.02 three days later.
Bitcoin's price slumped through 2014 and touched $315.21 at the start of 2015.
Prices slowly climbed through 2016 to over $900 by the end of the year.
In 2017, Bitcoin's price hovered around $1,000 until it broke $2,000 in mid-May and then skyrocketed to $19,345.49 on Dec. 15.
Mainstream investors, governments, economists, and scientists took notice, and other entities began developing cryptocurrencies to compete with Bitcoin.
Bitcoin's price moved sideways in 2018 and 2019, with small bursts of activity. For example, there was a resurgence in price and trading volume in June 2019, with the price surpassing $10,000. However, it fell to $6,635.84 by mid-December.
In 2020, the economy shut down due to the COVID-19 pandemic. Bitcoin's price burst into action once again. The cryptocurrency started the year at $6,965.72. The pandemic shutdown and subsequent government policies fed investors' fears about the global economy and accelerated Bitcoin's rise.
At the close on Nov. 23, Bitcoin was trading for $19,157.16. Bitcoin's price reached just under $29,000 in December 2020, increasing 416% from the start of that year.
Bitcoin took less than a month in 2021 to smash its 2020 price record, surpassing $40,000 by Jan. 7, 2021. By mid-April, Bitcoin prices reached new all-time highs of over $60,000 as Coinbase, a cryptocurrency exchange went public.
Institutional interest propelled its price further upward, and Bitcoin reached a peak of $63,558 on April 12, 2021.
By the summer of 2021, prices were down by 50%, hitting $29,796 on July 19. September saw another bull run, with prices scraping $52,693, but a large drawdown took it to a closing price of $40,710 about two weeks later.
On Nov. 10, 2021, Bitcoin again reached an all-time high of $68,789 before closing at $64,995.
In mid-December 2021, Bitcoin fell to $46,164. The price started fluctuating more as uncertainty about inflation and the emergence of a new variant of COVID-19, Omicron, continued to spook investors.
Between January and May 2022, Bitcoin's price continued to gradually decline, with closing prices only reaching $47,445 by the end of March before falling further to $28,305 on May 11. This was the first time since July 2021 that Bitcoin closed under $30,000. On June 13, crypto prices plunged. Bitcoin dropped below $23,000 for the first time since December 2020.
What Affects the Price of Bitcoin?
Supply and Demand
Like other currencies, products, or services within a country or economy, Bitcoin and other cryptocurrency prices depend on perceived value and supply and demand.
If people believe that Bitcoin is worth a specific amount, they will buy it, especially if they think it will increase in value.
By design, only 21 million Bitcoins will ever be created.
The closer Bitcoin gets to its limit, the higher its price will be, as long as demand remains the same or increases.
Bitcoins are created by mining software and hardware at a specified rate. This rate splits in half every four years, slowing down the number of coins created.
Bitcoin's price should continue to rise as long as it continues to grow in popularity and its supply cannot meet demand. However, if popularity wanes and demand falls, there will be more supply than demand. Then, Bitcoin's price should drop unless it maintains its value for other reasons.
New Bitcoin Securities
Another factor that affects Bitcoin's price also relates to supply and demand. Bitcoin became a financial instrument that investors and financial institutions used to store value and generate returns. As a result, derivatives have been created and traded by investors. This influences Bitcoin's price.
Speculation, investment product hype, irrational exuberance, and investor panic and fear can also be expected to affect Bitcoin's price because demand will rise and fall with investor sentiment.
Other cryptocurrencies may also affect Bitcoin's price. There are several cryptocurrencies, and the number continues to rise as regulators, institutions, and merchants address concerns and adopt them as acceptable forms of payment and currency.
Lastly, if consumers and investors believe that other coins will prove to be more valuable than Bitcoin, demand will fall, taking prices with it. Or, demand will rise along with prices if sentiment and trading move in the opposite direction.
Is Bitcoin a Good Investment?
Bitcoin is a cryptocurrency designed to be used as a payment method. Investors and traders began using it as an investment, as well, but its price is very volatile. This creates a significant amount of financial risk. It is best to talk to a professional financial advisor about your circumstances and goals before buying Bitcoin as an investment.
What Is Bitcoin's All-Time High Price?
Bitcoin reached an all-time high price of $67,566.83 on Nov. 8, 2021.
What Was Bitcoin's Cheapest Price?
Bitcoin began trading at $.09 in July 2010.
How Long Does It Take to Mine One Bitcoin?
The rate of difficulty changes. Mining depends on the software and hardware used as well as available energy resources, but the average time to find a block is about ten minutes.
Investing in cryptocurrencies and other Initial Coin Offerings (ICOs) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.
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