2021 The End Of The Beginning Of Bitcoin

We are at a peculiar moment in the history of money, one in which nation-states competing with conventional currencies are beginning to digitize them, in order to make their monetary policy more effective in some cases, or to make the borders between countries increasingly blurred for them in others.

Since the breakup of Bretton Woods, it would seem that innovation in this area has remained subdued to say the least, with a limited range of options.

As if this were not enough, the maturation and institutional adoption of Bitcoin, as well as the emergence of new digital currencies issued by corporate groups such as Diem (formerly Lira) opens up a new horizon of possibilities in which governments, companies and open source communities compete to offer the best solution in this new monetary environment, as opposed to the limited options we previously had as citizens.

The arrival of stablecoins could displace the traditional role of banks, which are still facing enormous challenges.

This is the end of the beginning of Bitcoin and cryptocurrencies, a beginning that had been marked by tremendous regulatory uncertainty, high volatility and a difficult user experience as the main bottlenecks.

But far from this circumstance, we now have before us an asset class that already allows unprecedented possibilities in an ideal financial environment for it, and which is redefining not only the function and utility of money, but also that of our financial system as a whole.

In this new phase of maturation we have been able to see how the hypothesis that Bitcoin could be the definitive asset to protect us in the scenario of a Black Swan such as the one brought about by the arrival of Covid-19 has been fulfilled, having maintained the de-correlation with the main stock market indexes that had characterized this asset in recent years and thus protecting those who had them in their portfolio, and it is this circumstance that has attracted more attention than ever.

This is why not only has interest at the retail and institutional level skyrocketed, but also for the first time the appropriate infrastructure is being created to accommodate it with equal or greater speed, creating opportunities such as

• Multichannel services for buying and selling and using Bitcoins that facilitate entry into this ecosystem;
• Custody, to avoid the risks of losing the private key and thus the funds, and offer a better user experience;
• Insurance, to cover the possibility of theft or loss of funds, or credit, to provide alternative uses for the enormous liquidity provided in Bitcoins, which generally did not move due to the lack of secure services to monetize it.

It is these opportunities, far from being future ones, that are already being seized by international companies such as PayPal to capture an important share in this new niche whose interest was marginal to date and in which few companies were positioned.

A trend has also emerged, initiated by MicroStrategy (MSTR:NASDAQ) in the replacement of the treasury of large multinationals in dollars by Bitcoins, which, promoted by its CEO Michael Sayor, has replaced it with a total of 70,470BTC in the last few months.

This is something that could be repeated by a large number of large companies as there is already enough liquidity for such operations to become a reality.

This would have a huge upward impact on the Bitcoin price in the coming year following the current trend.

Despite the enormous potential and hopeful outlook for cryptocurrency, there are risks that should be borne in mind and are far from being solved at present, such as the absence of the proclaimed decentralization in the governance of the network, which is currently distributed among less than 10 major companies, with more than 70% of computing power concentrated in China.

Also the high volatility, which, although progressively reduced as Bitcoin matures, will continue to be present, which is typical of something that is simultaneously an asset in the process of capitalization, an ecosystem in formation and a technology in the process of adoption.

The fact is that 2021 will be the end of the beginning, but there is still a long and prosperous road ahead for Bitcoin.