The value of cryptocurrency plunges and funds in the market rapidly decreases, so the transaction volume is called “crypto winter” in comparison to winter. The cryptocurrency market has experienced four Crypto winters so far. The first (2011) and second (2014) Crypto Winter were caused by hacking and bankruptcy on the Mount Gorks Exchange, which resulted from internal factors in the market. On the other hand, in the case of the third (2018) and the fourth (2022) crypto winter, the macroeconomic situation is considered a more important factor.
Bitcoin’s use, which was revealed in a white paper by Satoshi Nakamoto, the founder of Bitcoin, was a digital currency that could be paid and traded between individuals without financial institutions. However, it is true that cryptocurrency has strengthened its identity as an asset, that is, value storage. This is because the central bank’s astronomical liquidity supply has lowered the value of the currency and increased inflation concerns. Global financial institutions have found Bitcoin in search of appropriate investment destinations to prevent the value of assets from falling. Bitcoin is an asset whose supply is limited to 21 million, and the new supply is recorded in the book every 10 minutes. It can be seen as an asset specialized in inflation hedging. This is why Bitcoin is called “digital gold.”
Since the 1990s, globalization has progressed around the United States, the only hegemonic country, and the global economy seems to have escaped the fear of inflation. However, globalization is cracking due to geopolitical conflicts led by the U.S.-China hegemony competition. This means that inflation fears can be revived at any time.
Therefore, Bitcoin’s “inflection point” could be when the U.S. Federal Reserve stops raising interest rates or sharply lowers the pace of the hike. This is because Bitcoin is highly utilized as an inflation hedge. This is why global financial institutions such as JP Morgan, Bank of America, and BlackRock are directly or indirectly participating in the cryptocurrency market. Goldman Sachs went one step further and started a Bitcoin mortgage. If Bitcoin spot ETF approval is approved, demand for Bitcoin is expected to increase further. This is where Bitcoin’s value is expected to rise.
