After Bitcoin was blocked at the 50,000 mark, it once fell below $46,000, highlighting the volatility risk

Source: Huitong.com

On Sunday (February 14), the price of Bitcoin rose to $49,694, an increase of 3.57%. So far in 2021, Bitcoin has risen by nearly 70%. Bitcoin and other virtual currencies, long shunned by traditional financial companies, are now increasingly entering the mainstream as an asset and a regular payment tool. However, analysts warn that as the economy recovers, investors must be wary of the risk of Bitcoin sell-offs and further volatility. On Monday (February 15), Bitcoin fell below the $46,000 mark against the US dollar to $45,893 per coin, down about 6% on the day. The reversal of all the gains on Sunday further proves the risk of Bitcoin's sharp fluctuations in the future.

Driven by institutions and enterprises, Bitcoin may become a mainstream asset

BNY Mellon said last week it had launched a new unit to help clients hold, transfer and issue digital assets, just days after Elon Musk revealed Tesla had bought $1.5 billion worth of the cryptocurrency and would soon accept it as a form of payment for Tesla vehicles.

Last Friday, Toronto asset management company Purpose Investments Inc. announced that the Ontario Securities Commission has approved the company's Bitcoin ETF. Purpose Investments said: The ETF will be the world's first direct investment in physically settled Bitcoin, rather than derivatives, allowing investors to easily and efficiently enter the emerging cryptocurrency asset class. Investors can trade Bitcoin using futures contracts on the Chicago Mercantile Exchange (CME) derivatives exchange in the United States. They can also buy closed-end investment funds, such as the Toronto Stock Exchange's Bitcoin Fund.

“The actions of institutional investors and corporate America suggest this trend isn’t going away anytime soon,” said Edward Moya, senior market strategist at OANDA. “There’s still a lot of big money that’s going to jump on the bandwagon.”

Miami Mayor Francis Suarez also said on Friday that Miami is seeking to introduce Bitcoin into its operations, a move that could pay dividends in attracting technology companies. In January 2021, BlackRock Inc, the world's largest asset management company, listed Bitcoin as a compliant investment for two funds. Credit card giant Mastercard plans to support some cryptocurrencies, which also enhances Bitcoin's ambition to develop into mainstream finance, but many banks are still reluctant to participate.

Bitcoin and related sectors surge, beware of the risk of sell-offs and increased volatility in the future

Riot Blockchain, a cryptocurrency miner, rose 14% on Friday, posting its best weekly gain in a decade at 110%, its biggest weekly gain since 2017. Marathon Patent Group, a digital asset technology company, saw a weekly gain of more than 70%.

William, chief researcher at OKEx Research, believes that judging from the current market situation, the positioning of Bitcoin is changing. The direct reason for the last round of Bitcoin price surge was the entry of high-net-worth and institutional investors.

The deep-seated reason behind the massive purchase of Bitcoin by traditional institutions is the changes in the global macroeconomic situation. On the one hand, the global economic recovery has slowed down due to the impact of the epidemic, and on the other hand, central banks in many countries have introduced extremely loose monetary policies, pushing up inflation expectations in the financial market.

Regarding the future trend of Bitcoin, William said that institutional investors care about profits. After the epidemic is gradually alleviated, as the economy gradually recovers, monetary policy will gradually shift from loose to moderately tight. At that time, institutional investors may sell Bitcoin. Before that, Bitcoin will generally maintain an upward trend. Of course, as the price of Bitcoin gets higher and higher, market volatility will gradually increase. Investors are not recommended to add excessive leverage.

On Monday (February 15), Bitcoin fell below the $47,000 mark against the U.S. dollar, down more than 3% on the day, giving up all the gains on Sunday.

At 11:34 Beijing time on February 15, the exchange rate of Bitcoin against the US dollar was US$47,213.28 per coin.