By definition, critical mass is the minimum amount of fissile material needed to sustain a nuclear reaction. Comparing the cryptocurrency market to that definition it would seem as if the market reached critical mass a long time ago. The cryptocurrency market has been sustaining itself for quite some time which raises the question, what’s happening now? Prices for Bitcoin are skyrocketing like in 2018 and there is no end in sight. In our view, what’s happening now is that a second critical mass in the cryptocurrency market has been reached. After years of waiting the cryptocurrency market has reached the point at which consumer demand is driving adoption by mainstream institutions and we’re only in the opening round.
Bitcoin Goes Institutional
The adoption of Bitcoin (BTC) as both a means of transferring value and investment has been slow going but it is gaining momentum. Hurdles in the form of uncertain regulation and volatility kept most mainstream investors out of the market but that is changing fast. Demand for Bitcoin service by consumers and investors is leading more retailers and institutions to adopt the coin. That, in turn, is driving increased demand among consumers and investors.
Elon Musk and Tesla made headlines when he announced a $1.5 billion investment in the cryptocurrency but they are far from the first. Paypal began offering cryptocurrency exchange and custodial services to its customers in the fall of 2020 and there are others before that, Overstock.com is only one that springs to mind. The point is that there are a growing number of high profile businesses embracing the coin and with each new addition to the list market demand builds. And it is building to a point businesses are being forced to respond.
There were not one but four major announcements concerning Bitcoin in the wake of the Tesla revelation. News from MasterCard, Bank of New York Mellon, J.P. Morgan, and Morgan Stanley amount to one thing; their clients want to own Bitcoin and other cryptocurrency. J.P. Morgan reports that its managers are demanding the company support crypto while Morgan Stanley is mulling another investment in a crypto-focused business. MasterCard is perhaps the most aggressive saying it will support the use of several cryptocurrencies directly on its platform while Bank of New York Mellon will offer custodial services. The bottom line is that, regardless of use, competition within the financial world will have to support cryptocurrency or else risk getting left behind.
The Money Is Flowing Into Ethereum
If there is one thing about cryptocurrency that mainstream investors need to understand it is defi. Defi is an umbrella term for decentralized finance applications such as lending, borrowing, providing liquidity, and other financial services on the web. Investors who stake or capitalize these defi apps earn fees and interest but that is not the point. The point here is not that anyone should rush out and use these services but that money is flowing into them at a very fast pace.
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