Bitcoin caught up by financial giants

Coming from the depths of the Internet, bitcoin seems set to conquer the trading rooms of Wall Street. This private digital currency, created twelve years ago by one or a few anonymous developers, is about to convince the financial giants.

“There is a very strong demand from customers. We therefore put ourselves in a position to offer them ”, says for example Andrea Tueni, head of market activities at Saxo Bank.

→ EXPLANATION. Bitcoin, a digital currency without intermediaries

This establishment does not sell bitcoins directly, but markets an ETF (Exchange Traded Fund), a financial product that reproduces the price of bitcoin and allows investment in a more controlled regulatory framework. Many competitors are doing the same. “Large institutions are considering setting up teams specializing in cryptocurrency trading in their trading rooms”, for their clients or for their own account, adds Andrea Tueni.

Several big names in American finance have made such announcements, from BlackRock to Bank of New York Mellon. Added to this was the global electric car giant, Tesla, which announced the purchase of $ 1.5 billion in bitcoin.

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These rallies support the price which continues to climb. Bitcoin has almost doubled in value since 1er January, crossing in mid-February the symbolic bar of 50,000 dollars (41,200 €). A bitcoin is now worth the price of a kilo of gold, while all bitcoins issued are now worth more than $ 1,000 billion, more than the GDP of the Netherlands …

Bitcoin caught up by financial giants

Rush for new digital gold

Why such a rush? First there is the rush of thousands of individuals who dream of a quick fortune. But there are also purchases from companies and asset managers. “It is an investment that can make sense for companies or institutional investors, even if it is very risky, in the context of a search for yield and diversification, explains Andrea Tueni. The price of bitcoin, unlike gold, is decorrelated from the economic fundamentals that guide the rest of the market. “ In other words: bitcoin lives autonomously, seeming to largely escape major economic cycles.

Another motivation is added: bitcoin is benefiting from a growing mistrust of the dollar as a reserve currency: “While the hegemonic position of the United States is no longer so unquestionable, investors may feel that they hold too many greenbacks, and may turn to bitcoin”, argues Hervé Goulletquer, in charge of economic analysis at La Banque Postale Asset Management.

Does this mean that bitcoin could, tomorrow, be a digital equivalent of gold to become a reserve instrument? Some want to believe it. But in reality, we are far from it. Because bitcoin remains marked by its origins.

→ MAINTENANCE. “Bitcoin represents a real innovation”

Invented in 2008 by technophiles cultivating the libertarian spirit of the Internet, this digital token was first adopted by video game players. Then its characteristics interested all kinds of traffickers: drug dealers or wealthy entrepreneurs wanting to cheat the tax authorities, who saw it as a means of escaping the control of central banks and states.

100 million users worldwide

Despite this dark side, bitcoin has also found the support of a community that sees it as a universal currency that does not belong to anyone, a cheap way to transfer money from one country to another, and technological innovation. Many e-commerce sites have adopted it.

Today, one hundred million people around the world are believed to have bitcoins. Its popularity gave ideas to Facebook which announced in 2019 its intention to create its own digital currency, Libra. From then on, everyone understood that the phenomenon of private digital currencies was here to stay.

However, opinions remain divided on the true nature of bitcoin. Is it really a currency, when in fact, it is above all a means of speculating? For central banks, the answer is clear: “Bitcoin is not a currency at all. It is a speculative asset whose value does not correspond to any economic underlying and which is not the responsibility of anyone ”, indicated in 2017 the governor of the Banque de France, François Villeroy de Galhau, warning those who buy that they do so “At their own risk”.

A volatile and risky asset

Bitcoin, in fact, is not prohibited. Central banks are even watching the phenomenon with interest. But they are not ready to make a place for it alongside the dollar, the euro or the yen. “A currency is at the same time a unit of value, a reserve instrument and a means of exchange, recalls Hervé Goulletquer. For bitcoin to be one, its price would have to be more stable. However, this is not the case today. “

Its price is indeed extremely volatile and its evolution difficult to predict. At the end of 2017, it had already been the subject of a first runaway. Its price had doubled in a few weeks to approach $ 20,000 before falling immediately. Those who had bought at the top had been paid for.


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