[Twisting Bitcoin] Why Has Bitcoin Not Reached 100 Million Won?

Last Year Marked a 'Turning Point' as Cryptocurrency Became Mainstream
More Investors Joined as Bitcoin Rose... But Recently 'Fading'
Volatility Decreases as It Approaches Mainstream... The 'Irony' of Losing Investment Appeal

Cryptocurrency is sweeping across the globe. It is even likened to a so-called 'mania.' However, the more intense the mania, the more necessary it is to pause and observe. If problematic aspects are swept away along with the hype, they are bound to resurface as bigger issues someday. This is a time to calmly review the cryptocurrency market, a segment we call 'Twisting Bitcoin.'

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Gong Byung-sun] The leading cryptocurrency (crypto asset) ultimately failed to reach 100 million KRW in 2021. After falling from the 70 million KRW range in December last year to the 50 million KRW range, there has been little movement. This trend has continued into the beginning of this year. As of 11:20 AM on the 2nd, Bitcoin recorded 57.71 million KRW, down 0.35% from the previous day.

When Bitcoin hit an all-time high of 82.7 million KRW in November last year, expectations around it swelled. The anonymous influencer 'PlanB,' famous for accurately predicting Bitcoin prices, forecasted at the end of November that Bitcoin would surpass 100 million KRW. Cathie Wood, CEO of Ark Investment, went further, projecting it could rise to $500,000 (approximately 595.25 million KRW) within five years.

PlanB is known for precisely predicting Bitcoin's closing prices in August, September, and October last year. Although not as influential recently, CEO Wood was a figure who rallied individual investors worldwide. In other words, they subtly influenced cryptocurrency investors. So, is their claim that Bitcoin will reach 100 million KRW still valid this year? Can Bitcoin revive as more people take interest and it approaches the mainstream?

The 100 Million KRW Achievement Theory Has Been Consistent

In fact, predictions that Bitcoin would reach 100 million KRW this year have been circulating since early last year. In early 2021, Cho Jin-seok, director of KODA (Korea Digital Asset), predicted that if the trend continued, Bitcoin would reach 100 million KRW within the first half of the year. At that time, Bitcoin had risen to 81.99 million KRW. In October last year, when Bitcoin futures ETFs were launched on the U.S. stock market, similar forecasts of reaching 100 million KRW were made.

Although it failed to reach 100 million KRW, Bitcoin no longer experiences sharp crashes as before, even when bad news occurs. This indicates it is proving its role as an asset. Predictions suggested that if the U.S. Federal Open Market Committee (FOMC) ended asset purchases (tapering) early and hinted at interest rate hikes, Bitcoin would plummet. On December 4 last year, it dropped sharply by 8.59%, but unlike before, it did not halve from its peak. In April last year, Bitcoin fell from 81.99 million KRW to 33.9 million KRW. In 2018, it dropped from 28.88 million KRW to 6.62 million KRW.

There are various interpretations for this resistance to sharp declines, but the most convincing is its incorporation into the mainstream. Unlike in 2018, when it was not recognized as an asset, the U.S. Securities and Exchange Commission (SEC) approved the launch of Bitcoin futures ETFs. The number of companies investing directly has also increased. In the past, investment banks like Goldman Sachs showed interest, but last year, not only MicroStrategy but also Tesla and Nexon directly purchased Bitcoin. Furthermore, non-fungible tokens (NFTs) have become the most notable items in the gaming industry. In other words, as more people participate, volatility is also controlled.

Since last year, perceptions of Bitcoin have somewhat changed. It is viewed more as an asset than currency, and among assets, its role as a safe haven is emphasized. In February last year, Tesla purchased $1.5 billion worth of Bitcoin, explaining it as an 'asset that replaces cash.' Michael Saylor, CEO of MicroStrategy, which holds the most Bitcoin among private companies, also claimed Bitcoin would replace gold as the leading safe asset within ten years. CEO Wood, mentioned earlier, also purchased the Grayscale Bitcoin Trust (GBTC) from the asset management firm.

Do Cryptocurrency Investors Welcome This Situation?

[Image source=Yonhap News]

However, it is questionable whether cryptocurrency investors welcome this situation. The less volatility there is, the lower the probability of making large profits in a short period. As Bitcoin removes uncertainty and becomes mainstream, investors tend to exit.

This can be seen in the trading volumes of the four major domestic cryptocurrency exchanges (Upbit, Bithumb, Coinone, and Korbit). According to the cryptocurrency market data site CoinGecko, Upbit's trading volume on the first day of the new year was only about 1.9533 trillion KRW. On November 1 last year, Upbit's trading volume reached approximately 13.8904 trillion KRW. In two months, trading volume dropped to one-tenth. Although other exchanges did not experience as extreme a drop as Upbit, all saw their trading volumes halved compared to two months prior.

If public interest diminishes, reaching 100 million KRW becomes difficult. According to the cryptocurrency market data site CoinMarketCap, when Bitcoin hit its all-time high on November 9 last year, its trading volume was about $42.35799 billion. This was possible because many people consistently participated in trading, with average daily trading volumes exceeding $30 billion in October last year. When Bitcoin stagnated on December 25, last year, trading volume dropped to $19 billion.

The 'Icarus Wings' Phenomenon: Interest Declines as Bitcoin Approaches the Mainstream

A part of "Icarus" by Jacob Peter Gowy.

Bitcoin is a 'product of irony.' It was created for decentralization but seeks mainstream recognition; it desires more participation from investors and institutions but regrets the loss of volatility.

Ultimately, it is said to be in a situation akin to the 'wings of Icarus' from Greco-Roman mythology. The more it tries to escape the labyrinth of uncertainty and fly higher and farther, the more it gets held back. Professor Hong Ki-hoon of Hongik University's Department of Business Administration explained, “In fact, the goal of 100 million KRW may be meaningless. What is important is to keep investors interested in this market, which lacks clear fundamentals, but currently, investor interest is fading.”