Widespread digital asset adoption, BTC to compete with AUX, China’s CBDC rollout and EU regulation
Bitcoin (BTC) has rallied to
record highs yet, institutional investment remains cautiously low.
Top financiers cautious yet optimistic about digital asset adoption in 2021
Jeff Currie, Goldman Sach’s Head of Commodities Research, said that
more money needs to flow into BTC for it to stabilise and, at present, it is “very difficult to forecast” price due to volatility and uncertainty.
Yet Raoul Pal, former Goldman Sachs Executive and digital asset influencer, admitted that he
sold his entire gold (AUX) holdings to buy BTC and Ethereum (ETH) last Autumn. He said: “I have an order tomorrow to sell all my AUX to buy BTC and ETH (80/20). I don't own anything else, except some bond calls and some dollars, 98 per cent of my liquid
net worth.” Then, in early January, Pal said he could see ETH climbing to $20,000 this cycle.
Looking at institutional investment, Goldman Sachs, JPMorgan and Citigroup appear to be
exploring digital asset custody. Goldman Sachs issued a request for information (RFI) according to bank sources. The bank insider stated that digital asset custody was “part of a broad digital strategy” and mentioned stablecoins.
BTC to compete with AUX in the long run
Michael Novogratz, former hedge fund billionaire now digital asset investor, can see
BTC reaching $50,000 in 2021. He said: “It is easy for me to see BTC being at $50,000, that is ten percent of gold."
Mr. Novogratz's comment has bolstered BTC’s reputation as digital gold amid the COVID-19 pandemic and unprecedented government spending to stabilise economies. He added that: “It [BTC] is going to eclipse gold at one point."
A similar sentiment was shared by JPMorgan when the bank made the bold long term prediction that
BTC could even rally to $146,000 as it competes with AUX and an alt currency. The catch, however, is that BTC’s market cap is $588 billion whereas AUX stands at $2.7 trillion the bank’s strategists stated and that BTC’s volatility would need to drop before
it can match AUX’s market value.
Central banks racing to develop CBDCs
Central banks around the world are developing their own central bank digital currencies (CBDC). Michael Corbat, Chief Executive Officer at Citigroup,
explained that CBDCs are inevitable, the future of money and that the bank will help governments develop their own digital currency.
Indeed, the People’s Republic of China has moved to
begin testing its digital currency, the digital currency electronic payment (DC/EP). Controlled by the PRC’s central bank, the DC/EP is being rolled out across several cities with $29.75 worth issued to 50,000 residents to examine consumer behaviour before
rolling out the digital Yuan to millions, and then billions, of Chinese citizens.
Praising DC/EP, Chandler Guo, long time digital asset adoption advocate
commented that: "One day everyone in the world will be using DC/EP. DC/EP will be successful because there are 39m Chinese living outside the country. If they have a connection with China they will use DC/EP, they can make DC/EP become an international
EU introduces digital asset regulation amid increased adoption
In the West, the EU announced its first ever intention to
regulate the digital asset space. The executive arm stated that “the future of finance is digital” adding the importance to mitigate “any potential risks.”
The legislation intends to reduce investor risk and provide legal certainty to asset-issuing bodies. Another aim is to reduce what Valdis Dombrovskis, European Commission Executive Vice President, calls “market fragmentation” in this nascent financial space.
Regulators warn consumers of significant loss
Balancing the hype with caution, the UK Financial Conduct Authority (FCA)
cautioned consumers investing in digital assets that they “should be prepared to lose all their money” due to “significant price volatility.” The FCA reiterated the requirement that all UK firms offering digital asset related products must be registered
and that “operating without a registration is a criminal offence.”
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