Bitcoin price drops sharply after new developments in Germany and France

Bitcoin prices fell about 5% to $54,400/BTC on the morning of July 8 in the Singapore market, about $19,000/BTC lower than the record high recorded in March. Lower-valued cryptocurrencies such as ether, XRP and Dogecoin also fell sharply.

Bitcoin cryptocurrency. Photo: AFP/TTXVN

Market sentiment was affected by signs that the German government was dealing with the seized bitcoin, while global markets were cautious in the wake of the weekend’s French elections. The second round of the French parliamentary elections concluded last weekend with results that left the country facing the risk of political deadlock, creating a hung parliament.

Concerns that tokens could be sold off from Japan's Mt. Gox exchange also weighed on bitcoin prices. Reports said Mt. Gox was planning to repay creditors. Tokyo-based Mt. Gox, once the world's largest bitcoin exchange, was hacked in 2011 and went bankrupt in 2014. The long-awaited return of tokens to creditors has focused markets on the risk of a massive sell-off.

The big question for digital assets is when the “burden” of sell-offs related to Mt. Gox and Germany will end.

Bitcoin surged to an all-time high in the first quarter of this year, fueled by demand for the first bitcoin exchange-traded funds (ETFs) in the U.S. But the inflows have dwindled and the cryptocurrency’s advantage over assets like stocks this year is rapidly eroding.

According to financial experts, the most important difference in the bitcoin wave in recent months is that it is mainly driven by large institutional investors. “Traditional asset investment institutions were on the sidelines. Now they are the main growth drivers of the crypto market,” said Nathan McCauley, CEO of digital asset platform Anchorage Digital.

Meanwhile, there is a debate today about whether bitcoin can be considered a hedge asset like gold, especially as the world faces increasing uncertainty and geopolitical volatility.

Expert Chris Kline, co-founder of Bitcoin brokerage IRA, believes that in some respects, bitcoin is showing quite well its potential as an important hedge asset.

With a limited supply of only 21 million coins, bitcoin will provide an effective alternative to the fiat currency system when they lose value, according to Kline. Moreover, compared to gold, which is currently too expensive, bitcoin is a more affordable asset.

But Creighton University finance professor Robert R. Johnson has dismissed this idea, arguing that bitcoin can only be used as a vehicle for speculation.

The professor explained that the price movement of bitcoin over the years is similar to the rise and fall of stock prices. Therefore, “there is no way to accurately determine the value of bitcoin or any other cryptocurrency, because participants in transactions will not be able to apply traditional financial methods to grasp the intrinsic value (real value) of these assets.”

Mike Novogratz, CEO of digital investment management firm Galaxy Digital, recently commented that investors will soon prefer trading bitcoin - also known by many as "digital gold" - to trading this precious metal in real life.

According to Mr. Novogratz, although the current market capitalization of bitcoin is less than 1/10 of gold ($1,210 billion compared to $13,790 billion), the world's largest cryptocurrency will soon replace this long-known asset class.

He said that of the estimated $85 trillion in assets owned by the baby boomer generation (generally defined as individuals born between 1946 and 1964), the vast majority is managed by professional investors. About half of those professional investors have access to 10 recently approved Bitcoin spot exchange-traded funds. Platforms like BlackRock and Fidelity, which have been largely buoyed by baby boomer wealth, are encouraging clients to allocate as little as 1% to 3% of their assets to crypto. If successful, the new liquidity could be in the trillions of dollars.

CEO Novogratz also predicts that once the Baby Boomer generation's wealth is passed on to the next generation, the allocation to digital assets will only accelerate.

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