There is an old say that says “Be careful on what you wish because you may get it”. We all have been waiting for the institutional adoption of crypto and bitcoin.
Well, the month of December is the living evidence that they are finally here.
Large institutional investors bring liquidity to the market and some sort of social proof that the industry is now much more than a mere group of disgruntled techies living in the fringes of society.
That type of investors brings also with them their legal and mental legacies.
Why legal? Taxation. Large of volumes on long positions needed to be liquidated in order to deal with the respective Revenue Collection Services of their jurisdictions.
It could be simply to pay taxes or taking advantage of the dips to generate a capital loss event and book a tax loss for 2021 that would offset other victories.
Why mental? Cost of Opportunity. Getting out of successful trades to pour liquidity into loosing trades with the hope of lowering the dollar average cost and be able to pretend that the traditional world is not collapsing. (Does Evergrande rings any bell?)
But there is one good news generated in December that in our view is tight to the arrival of the institutional investors and it’s the fact that despite the price volatility, the Hash Rate of computer power in the Bitcoin Blockchain reached an All-Time Hight record.
This is very significant because its shows that a large proportion of the community recognizes the important of having a solid and robust backbone that support and powers the most liquid and largest capitalized of all crypto assets.
Capital infrastructure is oftenly present when there is long term and robust demand for a specific market.
It also demonstrates how resilient or Antifragile as some would say, the bitcoin network is. It not only survived the ban from the Chinese authorities in June but thrived to a point that in mere 6 months, it surpassed the computer power connected to the Blockchain.
But there is much more on this topic. The new record reached in December is supported by a few new facts in the ecosystem.
The first is that we probably witnessed one of the largest transfers of wealth in the history.
The traditional movements of wealth within Capitalism are often from the poor to the rich but in this case what we saw, was a transfer of wealth from the East to the West.
There is no doubt that crypto will dominate the world’s economy in the not very far future and those regions that host economic activity surrounding this new paradigm are the ones that will take the lead.
We are not going to argue on the merits of why China decided to ban bitcoin mining, but our respectful opinion is that they did a disservice to themselves with that decision.
The second it’s linked to ESG. Yes, now with more mining operations moved into the United States and with the tight regulations that carve the path to the use of 100% renewable or green energy sources, the debate as to whether bitcoin is an environmental problem is fading away.
The large volume of bitcoin mining rigs is connected to nuclear, wind or hydro powered grids in several States of the US.
There is plenty of room for counter argument to every single topic that we just presented in this article, but one thing is true and beyond any discussion. The fact that we now have a Bitcoin Blockchain that is more powerful, robust, decentralized and green.
And that is the highlight of December and certainly one of the 2021.
Yours in Crypto.