As Bitcoin rallies to record highs, many are looking to make sense of the sudden price boom. PwC’s Global Crypto Leader Henri Arslanian has some answers.
Bitcoin last made the headlines in 2017, when its price jumped from around 900 to nearly $20,000 in a single year, followed by a 30% drop in value shortly after. 2020 saw a similar boom. By 16th December, the cryptocurrency had broken through $20,000, before doubling in three weeks to cross $40,000 by 8th January 2021. That’s a 300% jump in 2020 alone. At the time of writing, the Bitcoin is worth over $56,000.
With the whole world grappling for answers, Henri Arslanian spoke – Global Crypto Leader at PwC – to CNBC to shed some light on this record-breaking trend. “When you look at this bitcoin rally that weve been seeing over the last couple of weeks and months, really theres two elements driving it.”
“One is the continuous entry of institutional players.” Arslanian cited Paul Tudor Jones as the prime example here – a billionaire hedge fund manager who first revealed his Bitcoin investments in May 2020. He has since been vocally bullish about Bitcoin, positioning it as a hedge against inflation.
Already in October, Tudor Jones told CNBC that Bitcoin’s rally was only in its “first inning” – a prediction that has come through with conviction. In November, Wall Street investment fund Guggenheim Partners revealed plans to invest more than half a billion dollars in Bitcoin, which gave the price rally a remarkable boost.
According to Arslanian, more institutional players will keep joining the party. “We expect this to continue over the next couple of months for various reasons. A lot of traditional insturments allow institutional investors to explore Bitcoin. There’s also a lot of regulated players as well, which was not the case a couple of years ago.”
The gradual institutionalisation is giving an air of legitimacy to the cryptocurrency – a deficit from which it has historically suffered. Many are now comfortable conducting large transactions via Bitcoin, putting its foot in the door of the payments market. Even PwC Hong Kong, where Arslanian sits, has previously accepted advisory fees via Bitcoin.
With bullish institutional investors leading the charge, Arslanian suggests that a fear of missing out among retail investors is the second factor fueling the latest rally. “If you compare it to five years ago, where there were only five million people with an account at a crypto exchange: according to the latest data that we have, there’s over 100 million people with accounts at a crypto exchange.”
And the financial services world is coming around as well. “It’s probably never been easier to buy Bitcoin and other cryptocurriencies, especially when you consider the entry of large technology firms like a Paypal or a Square, which have made it even easier.”
With the world of FinTech advancing at a rate of knots, the niche for Bitcoin is only expected to get larger – even if its volatile price fluctuations continue to perplex.