On January 1, 2017, the price of bitcoin hit $1,000 for the first time in three years. Only eleven months later, one bitcoin is worth more than $10,000. This marks an over 900 percent return on investment for bitcoin holders year-to-date.
Due to bitcoin’s new all-time
high, many newcomers to bitcoin feel that the digital currency has very little upside left at these levels, especially as many “experts” are suggesting that bitcoin has now entered bubble territory.
However, there are actually several reasons why the price of bitcoin still has substantial upside potential that anyone who thinks they have “missed the boat” when it comes to bitcoin should consider.
Institutional investors are now entering the market
The biggest argument for a continuance of bitcoin’s impressive price rally is the fact that institutional investors, such as hedge funds, private banks, and mutual funds, are only now starting to enter the cryptocurrency market.
Since the beginning of the year, over 84 new cryptocurrency-focused hedge funds have been launched to capitalize on the huge potential gains that this asset class offers.
Private banks, such as Switzerland-based Falcon Bank and Swissquote, have also started to offer bitcoin as an investment option for their high net worth clientele while French asset manager TOBAM has announced the launch of Europe’s first bitcoin mutual fund.
Probably the biggest indicator of major upcoming institutional fund flows into bitcoin and other digital currencies, however, is the announcement by the Chicago Mercantile Exchange (CME) to launch bitcoin futures contracts. Should the U.S. Commodity Futures Trading Commission approve this new financial product then betting on the price of bitcoin would become accessible to all institutional investors in a regulated, exchange-traded format. Moreover, it would also allow investors to hedge their bitcoin exposure using futures, which would reduce the risk of holding bitcoin.
Given that the first wave of bitcoin investors was largely composed of private individuals, the entrance of institutional money into bitcoin could boost the price to a multiple of where it is trading now. That is because institutional investors do not come with millions to invest but with billions.
Cryptocurrency acceptance is growing among regulators
Almost equally important as the increase in new funds flowing into bitcoin and other digital currencies is the willingness by financial regulators and lawmakers to allow both private and institutional investors to invest in digital currencies.
Most major bitcoin economies, such as the U.S., U.K., Europe, Japan, and South Korea, have made no indications that they tend to restrict investors from investing in bitcoin. And given the amount of business, jobs, and wealth bitcoin startups have created in the past nine years, it is unlikely for major democratic governments to put a ban on digital currencies at this point in time.
The friendlier the regulatory environment is for bitcoin, the more investors will feel comfortable investing in the digital currency.
Bitcoin is becoming mainstream
2017 has been the year where bitcoin has gone mainstream and this has done wonders for its price. Only a few years ago, bitcoin was largely associated with illegal activities on the dark web and very few people knew what bitcoin really is and how it works.
Today, however, over 75 percent of adults in America have heard of bitcoin and many of them are aware that it is an exciting investment opportunity. Millennials, especially, have taken a liking to bitcoin as an investment.
As bitcoin continues to become more and more mainstream across the globe, the more individuals will purchase the digital currency. This, in turn, will also likely help to push the price of bitcoin to new highs.
