Perhaps it is old news that Bitcoin and crypto were “stigmatized” and shunned by the world, thinking that this is just a financial bubble that can burst at any time. With the recent Bitcoin ETF event, the view of the international market has gradually changed. Is Bitcoin in particular and Crypto in general really a financial bubble, or is it a new wave of technology like the internet in the 2000s?
Bitcoin ETF – Crypto’s historical breakthrough
In 2017, China’s imposition of a ban on all domestic exchanges and forms of capital mobilization through ICOs caused a panic sell-off, causing the crypto market to collapse. Since then, after 7 years of existence and development, the cryptocurrency market seems to have matured, and partly proved to the world that it is not just an instant fever. We can see that now, many large countries including the US, Singapore, Japan… have a more open view, even supporting the development of crypto.
Especially with the recent launch of Bitcoin ETF, when Bitcoin was listed on traditional stock exchanges, it has an extremely important meaning. It opens up opportunities for traditional investors to easily participate in the crypto market. In other words, Bitcoin ETF represents the mainstream money flowing into the crypto market. In addition, Bitcoin’s presence on stock exchanges also helps financial institutions guarantee it legally, increasing transparency and trust. This will promote more and more investment funds and large institutional investors to start participating in the crypto market.
That’s the investment aspect, but what about other issues of Bitcoin and this market?
Can Bitcoin replace traditional currencies?
One of the first and most important missions set by the father of Bitcoin, Satoshi Nakamoto, was to replace traditional currencies. However, in reality, Bitcoin still has certain limitations. In particular, the price fluctuation amplitude of Bitcoin is too large to be a stable means of payment. A person receiving a salary in Bitcoin can see the value of that amount decrease by 10% in just one day. This is a risk that no one wants to accept.
In addition, the nature of currency is a control tool for governments and central banks to stabilize the economy. Monetary policy is an important factor in macroeconomic management, which can be considered the lifeblood of a country. Therefore, the use of a decentralized, uncontrollable currency like Bitcoin is something that governments do not want at all! Therefore, although there are now some small countries that accept Bitcoin as a means of payment (El Salvador), for large economies, traditional currencies are still an important pillar and are difficult to replace.
Alcoin and the Dotcom Bubble: Will History Repeat Itself?
The crypto market is not only Bitcoin but also many altcoins. And the truth is, if calculated on a scale of 10, Bitcoin’s fluctuation amplitude is 5, then altcoins should probably be 11! Anyone who has invested in this market for a long time is probably too familiar with the fact that altcoin prices can increase from several times/several dozen times to decrease by more than 90% in a crypto market cycle. This is what makes many investors compare them to the dotcom bubble, when a series of technology companies sprung up with “sky-high” values and then collapsed after a short time. Some current altcoins are also in a similar situation because they do not have a solid intrinsic value.
If you look at the cryptocurrency market capitalization rankings, over the past 10 years, only Bitcoin has maintained its top position. Other altcoins are often replaced, especially when expanding to the top 100 or 200 coins. The disappearance of these altcoins can be considered a natural purification process, helping to eliminate poor quality projects, and leaving behind projects with real value.
The future of Bitcoin: Safe investment or a volatile channel?
In recent years, with its dominant position as well as its scarcity, Bitcoin has been considered by many as “digital gold”. Although compared to other traditional financial markets, it is still an investment channel with relatively large fluctuations. However, with factors such as the participation of large investment funds, Bitcoin ETFs, and the high security of blockchain, Bitcoin still has great potential to become a long-term store of value. Indeed, today, many investors have begun to view Bitcoin as a sustainable asset, like gold or real estate, although its development history is only over 10 years old. However, to successfully invest in the long term, investors need to have an understanding of the market, know how to choose the right time to buy and sell, and should not invest all their capital in one asset.
So, is the crypto market a bubble?
Crypto, especially Bitcoin, has made great strides and is increasingly recognized. With positive signals from financial institutions and governments, crypto is no longer a bubble that can burst but is gradually transforming into a part of the global financial market.
On the other hand, the market is still volatile and risky, especially with altcoins. However, investors can see crypto as part of a diversified investment portfolio. What we are witnessing may just be the beginning of a new financial era, and those who seize the opportunity may be the beneficiaries in the future.
