Institutional investments and ecosystem growth influence the price of Bitcoin. Inflation and devaluations have triggered interest in Bitcoin in Latin America.
In the last three months, Bitcoin’s growth has been the most prominent bullish curve since the rise that it experienced in 2017. This makes 2020 the best year for the pioneering cryptocurrency, according to the director of Bitso Alpha, Eduardo Arenas, and the CEO of Buda.com, Guillermo Torrealba.
Arenas and Torrealba agree with the CEO of Uphold, Juan Pablo Thieriot, on the factors that have influenced the Bitcoin rally.
Arenas notes that the fact that Bitcoin has exceeded 100% of its value throughout 2020, becoming an international trend, is related to several factors. He mentions the steady growth of the ecosystem in recent years, a better understanding of the market, and more widespread adoption.
He also highlights the institutional investment boom that has occurred in recent months. He mentions companies like Microstrategy, Square, the support of major investors such as Paul Tudor Jones, Stanley Druckenmiller, Ruffer, and One River Asset Management, who publicly declared to have investments in Bitcoin.
Besides, the decision that PayPal made last October allows its customers to buy and sell Bitcoin and other cryptocurrencies within its platform, says the director of Bitso.
Those who work at Buda.com agree with the previous statements. According to a note, the Latin American exchange says that “the reasons are very varied” and also links the rise to institutional investors. The influence of the words of defense from some well-known Bitcoin entrepreneurs, such as the Winklevoss brothers, adds to it.
Buda highlights remarks from Wall Street specialists, including those of eToro analyst Adam Vettese. He links that growth to the fact that many business people use Bitcoin to hedge against the inflation that the constant economic stimulus from the government has generated.
Likewise, Torrealba talks about the current support for Bitcoin in the industry, which did not exist before. He mentions the public entry into cryptocurrencies by figures like Paul Tudor Jones, Stan Druckenmiller, and Bill Millen, among others. Even the second richest man in Mexico confessed that 10% of his portfolio is in crypto assets.
The CEO of Buda adds to this the decision of the US banking regulator to authorize banks to safeguard cryptocurrencies, along with the delivery of the first federal bank licenses to companies in the ecosystem.
Bitcoin Market Grows Although Its Price Drops
The directors of Bitso Alpha and Buda state that these use cases for Bitcoin as a store of value are the most notable, especially in the Latin American market. This is something that not only happens during periods of price rise.
“We have detected a constant increase in the number of users since last year, even in very low periods. Specifically, in Latin America, we notice that people are increasingly using cryptocurrencies to satisfy their daily financial needs, as a safeguard of value, to protect their money from inflation and also to make payments between countries, regardless of price,” said the director by Bitso Alpha, Eduardo Arenas.
Similarly, the CEO of Buda.com, Guillermo Torrealba, notes that this year the sale of Bitcoin in Chile has recorded a growth of 270% compared to 2017 and 120% compared to 2019. “On average, there have been more of 27,000 Bitcoin purchase and sale transactions per month only on Buda.com, exceeding 300,000 per year for the first time in the history of the platform.”
Other Reasons for the Bitcoin Rally: Inflation and Devaluations
Uphold CEO Juan Pablo Thieriot introduces the issue of inflation and the devaluation of local fiat currencies as other reasons behind the Bitcoin rally. He thus highlights the fear that citizens and companies have about the loss of value of many sovereign currencies, including the US dollar.
He believes that the participation of institutions in the purchase of Bitcoin, as a protection mechanism against devaluation, is not the only factor that has driven this growth.
Thieriot also points to a “totally unexpected and unusual” situation: the substitution of gold as the main store of value in the world. Everyone knows that gold has always been the natural hedge, but people can sell it to opt for a placement in Bitcoin as the preferred alternative. The COVID-19 pandemic has accelerated the thesis behind Bitcoin: all sovereign currencies always devalue, sometimes very abruptly.
This movement occurs regardless of positions against the main cryptocurrency in the market. For example, Jamie Dimon, CEO of JP Morgan, called Bitcoin a fraud. On the other hand, Kenneth Rogoff, a former IMF chief economist, and Harvard professor claimed that its value was close to zero.
By Alexander Salazar
