Bitcoin's price fell by approximately 5%, to $54,400/BTC on the morning of July 8th in the Singapore market, about $19,000/BTC lower than its record high recorded in March. Lower-valued cryptocurrencies such as Ether, XRP, and Dogecoin also experienced sharp declines.
Market sentiment was influenced by signs that the German government is handling the seized bitcoin, while global markets generally remained cautious due to the weekend's election results in France. The second round of the French parliamentary elections concluded last weekend with results that leave the country facing the risk of political deadlock. This creates a hung parliament (a situation where no single political party wins a majority in parliament after an election).
Concerns about a potential sell-off of tokens from the Japanese exchange Mt. Gox are also putting downward pressure on bitcoin prices. Reports indicate that Mt. Gox is planning to repay its creditors. Mt. Gox – once the world's largest bitcoin exchange, based in Tokyo – was hacked in 2011 and went bankrupt in 2014. The long-awaited return of tokens to creditors has led the market to focus on the risk of a massive sell-off.
The big question for digital assets is when the sell-off related to Mt. Gox and Germany will end.
Bitcoin surged to an all-time high in the first quarter of this year, driven by demand for the first bitcoin exchange-traded funds (ETFs) in the US. However, the flow of money into this market has gradually slowed, and the cryptocurrency's advantage over assets like stocks this year is rapidly eroding.
According to financial experts, the most significant difference in the recent bitcoin wave is that it has been primarily driven by large institutional investors. Nathan McCauley, CEO of the digital asset platform Anchorage Digital, said: “Traditional asset institutions used to be on the sidelines. Now, they are the main growth driver of the cryptocurrency market.”
Meanwhile, a currently debated issue is whether Bitcoin should be considered a hedge asset like gold, especially as the world grapples with increasing uncertainty and geopolitical volatility.
Expert Chris Kline, co-founder of the Bitcoin brokerage IRA, believes that in some respects, Bitcoin is demonstrating its potential as an important hedge asset.
According to expert Kline, with a limited supply of only 21 million coins, Bitcoin will provide an effective alternative to the fiat currency system when it depreciates. Furthermore, compared to gold, which is currently too expensive, Bitcoin is a more accessible asset.
However, Professor Robert R. Johnson, a finance specialist at Creighton University, rejected this idea, asserting that bitcoin can only be used as a means for speculation.
The professor explained that the price fluctuations of Bitcoin over the years are similar to the ups and downs of stock prices. Therefore, "there is no way to accurately determine the value of Bitcoin or any other cryptocurrency, because traders cannot apply traditional financial methods to grasp the intrinsic value (actual value) of these assets."
Mike Novogratz, CEO of digital investment management firm Galaxy Digital, recently stated that investors will soon prefer trading bitcoin – also known as “digital gold” – to trading the physical metal.
According to Novogratz, although Bitcoin's current market capitalization is less than one-tenth of gold's ($1.21 trillion compared to $13.79 trillion), the world's largest cryptocurrency will soon replace this long-established asset class.
He stated that the estimated $85 trillion in assets held by Baby Boomers (typically defined as individuals born between 1946 and 1964) are largely managed by professional investors. Approximately half of these professional investors have access to the 10 recently approved spot Bitcoin ETFs. Platforms like BlackRock and Fidelity have largely thrived on the Baby Boomer wealth and are encouraging clients to allocate at least 1-3% of their assets to cryptocurrency. If successful, this could generate trillions of dollars in new liquidity.
CEO Novogratz also predicted that once the wealth of the Baby Boomer generation is passed on to the next generation, the allocation to digital assets will only accelerate.
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