[Bitcoin Now] Institutional Inflows and Liquidity Expansion Drive Recovery to 57 Million Won Range

Companies Consistently Buying Bitcoin
Powell, US Fed Chair, Maintains Liquidity Expansion Policy, Also Positive Impact

On the afternoon of the 24th, the Bitcoin price is displayed on the Upbit Lounge cryptocurrency exchange price board in Gangnam-gu, Seoul. [Image source=Yonhap News]

[Asia Economy reporters Minwoo Lee and Byungseon Gong] As companies continue to buy Bitcoin and U.S. financial authorities maintain a liquidity expansion policy, the leading cryptocurrency Bitcoin rebounded to the 57 million KRW range.

According to the domestic cryptocurrency exchange Upbit, as of 10:45 a.m. on the 25th, Bitcoin recorded 57,606,000 KRW, up about 2% compared to the previous day. It rebounded after falling to 52,875,000 KRW at 9:24 a.m. the previous day.

Recently, Bitcoin has shown an upward trend, hitting new highs every day. On the 20th, it recorded 65,985,000 KRW, more than doubling compared to the beginning of this year. In particular, the price sharply rose whenever Elon Musk, CEO of Tesla, praised Bitcoin. On the 8th, when Tesla disclosed that it had purchased about 1.5 billion USD worth of Bitcoin, the price rose more than 17% in just one day. Afterwards, when Janet Yellen, U.S. Treasury Secretary, hinted at cryptocurrency regulation, the price fell back to the 50 million KRW range.

However, the reason it did not lead to a crash like in the past is analyzed to be because institutional investors have entered the market. On the 23rd (local time), Bloomberg reported that concerns eased as companies such as cloud software firm MicroStrategy and online payment company Square bought cryptocurrencies. MicroStrategy is the company holding the most Bitcoin, owning a total of 90,531 coins. Based on the price that day, it amounts to over 5.2 trillion KRW.

According to U.S. economic media CNBC, last week MicroStrategy issued convertible bonds worth 1.05 billion USD (about 1.1629 trillion KRW) and then purchased an additional 19,452 Bitcoins. Square also revealed that it holds Bitcoin worth about 170 million USD, equivalent to 5% of its cash holdings.

There is an interpretation that trust in the cryptocurrency market has been established due to institutional investors. Following MicroStrategy and Tesla, payment companies such as PayPal and Square have also participated in the Bitcoin market. Financial institutions like BlackRock and Bank of New York Mellon have recognized Bitcoin as an investment target, indicating that it is entering the institutional framework. On the 18th (local time), the Toronto Stock Exchange (TSX) in Canada began trading North America's first Bitcoin price-tracking exchange-traded fund (ETF). CNBC analyzed that since institutional investors are currently participating in the cryptocurrency market, many Bitcoin investors view the situation differently from the 2017 bubble.

The maintenance of the liquidity expansion policy is also interpreted as having a positive effect. Bloomberg reported that when Jerome Powell, Chairman of the U.S. Federal Reserve (FED), said at the Senate Banking Committee hearing, “We will maintain the current pace of purchasing Treasury and agency mortgage-backed securities to provide liquidity,” not only the stock market but also the cryptocurrency market rose. So far, the cryptocurrency market affected by liquidity expansion responded once again to Chairman Powell’s remarks. Jim Reid, a strategist at Deutsche Bank, forecasted, “Bitcoin will maintain its upward trend for the time being based on large-scale liquidity.”