Bitcoin is on its way to gaining mainstream adoption, according to multiple reports this week. Cathie Wood, CEO of Ark Investment Management, reiterated an optimistic case for crypto at a conference, while Citigroup said this could be near a “turning point”.
However, Bitcoin is also increasingly increasing global energy consumption and raising concerns about the environmental impact and sustainability of the cryptocurrency.
At a Mizuho Securities conference earlier this week, Wood reiterated bullish views on Bitcoin, saying that institutional interest in crypto could be a significant positive driver of price, according to a release from Mizuho analyst Dan Dolev on Thursday. If institutional investors provided between 2.5% and 6.5% of the money they manage for crypto, the price of Bitcoin could, according to their analysis, rise between $ 200.00 and $ 500,000.
Bitcoin recently traded at around $ 49,700, which corresponds to a total market value of around $ 927 billion, according to Coindesk. A year ago, Bitcoin was trading around $ 9,000. It’s up 69% in 2021.
(Ticker: TSLA) bought Bitcoin in order to finally enable the purchase of his cars in the currency. Wood says more companies are likely to invest in crypto amid growing concerns that fiat currencies could be devalued by inflation and central bank monetary policies as global debt rises.
Citigroup said in a report this week that bitcoin’s institutional adoption is accelerating. “The intersection of low yields and inflation expectations has increasingly fueled institutional investors’ belief that Bitcoin could provide an inflation hedge, portfolio diversifier and safe haven that traditional government bonds do not currently offer all at once,” Citi’s research team wrote.
Bitcoin is now trading at more than $ 20 billion a day, resulting in a crypto exchange volume of $ 500 billion in the first few weeks of 2021, according to Citi.
Bitcoin could be a good insurance policy against “asset seizure by inflation”, according to Dolev. If people with net worth of $ 1 million or more take out 5% bitcoin insurance, it could add $ 300.00 to $ 400,000 in price, Wood said, citing a study.
None of these forecasts are likely to have any short-term effects. And Bitcoin is not without controversy. For one thing, it is very volatile and goes through several boom-bust cycles. Treasury Secretary Janet Yellen recently warned that it was “inefficient” as a transactional currency. In fact, it can work better as an asset class than an everyday currency as it can lose or gain 10% in the time it takes to buy a cup of coffee.
Bitcoin’s environmental impact is also increasing. Bitcoin mining is very energy intensive and requires large amounts of electricity through a global computer network to verify transactions and generate new currency units.
Bitcoin’s energy consumption has skyrocketed, according to the Cambridge Bitcoin Electricity Consumption Index. Consumption has more than doubled since last November, reaching an estimated annual consumption of 130 terawatt hours (TWh). In connection with this, the global Bitcoin computer network consumes at least as much electricity as countries like Argentina, Ukraine and Sweden in a full year, according to Cambridge. The world consumes more than 23,400 TWh of electricity per year, with Bitcoin accounting for nearly 0.6%.
China – where 65% of the world’s bitcoin is mined using cheap coal power – is starting to decline. According to media reports this week, the country’s Inner Mongolia region plans to ban new cryptocurrency mining projects and shut down existing ones.
However, analysts argue that Bitcoin could be a major growth driver for the tech sector, especially payment stocks like
(SQ). The companies are now allowing users to buy and store the currency in their apps to create a bridge for retail use.
According to Wood, Bitcoin is piquing the interest of millennials and other young consumers in Square and is ultimately helping to transform the Cash app into a full-service digital wallet. The Cash app now generates average annual revenue of $ 41 per user. Wood could reach $ 400 to $ 500 in the next five to ten years, according to Dolev.
Bitcoin could also be a growth driver for PayPal. The company plans to allow users to finance purchases in Bitcoin, and it could reportedly be close to buying a crypto custodian, Curv, for $ 500 million. A PayPal spokesperson told Barron that “nothing has been finalized”.
If Bitcoin fueled a revival for Square and PayPal, which are among the technology stocks that have lost ground in the past few weeks, it would surely help
Exchange Traded Fund (ARKK). Square is the ETF’s second-largest holding with 6% of assets, after Tesla with 10%. PayPal accounts for 2.7% of the fund.
The ETF saw a whirlwind 152% surge over the past year, but has fallen around 24% in recent weeks as top positions like Tesla, Square and Roku (ROKU) pulled out. The ETF can now be better or worse correlated with Bitcoin.