Here are potential reasons why the bitcoin is facing headwinds in its efforts to join as a mainstream currency, despite its underlying technological strength.
While shedding light on why bitcoin is facing headwinds on joining the mainstream, BlackRock’s Chief Executive, Larry Fink stated the cryptocurrency still remains a “speculative” investment that thrives because of its anonymous nature.
“The reason why it does so well is it is anonymous. It’s anonymous, and it’s cross-border,” said Fink. “If you legitimize it, you know who your counterparties are…the question is how many people will use it if you have to acknowledge you are a buyer or a seller.”
He termed bitcoin as a “very speculative instrument. More importantly, it is an instrument that people use for money laundering.”
From its November 8 high of $7,888, the value of the bitcoin has depreciated by 29% following the cancellation of a planned tech upgrade and midst persistent concerns of a bubble.
This Monday, the bitcoin has recouped some of its losses.
However, on the long run, investors who have held on to the bitcoin have however fared well.
Despite the depreciation, its value has increased sixfold this year. Long term investors have benefited even more: in 2011, bitcoin’s value was below $3.
Fink advised, investors who are in for the long term, and who have “record amounts” on the sidelines should focus on traditional assets, including stocks and bonds.
For investors in the 30s, “100 percent equities is the right investment strategy,” at a time when the world’s economies are enjoying “synchronized growth” for the first time since the 2007-2009 financial crisis.
Bitcoin “is tiny in the scheme of financial markets,” said Fink. However, “there’s too much focus on bitcoin,” said Fink. “I don’t know why it has so much fascination for the press.”