Bitcoin is experiencing its biggest decline since February, with intraday decline of as much as 15%. Several news sources / online reports suggest that the plunge is due to the speculation that U.S. Treasury may crack down on money laundering that’s carried out through digital assets.
In the past months, Bitcoin / cryptocurrencies have been gaining increasing institutional acceptance. For example, Tesla allocated part of its assets to Bitcoin and started accepting Bitcoin as a means of payment; MasterCard said it will start supporting cryptocurrencies on its network; Bank of New York (one of the oldest US banks) said it will start financing Bitcoin and other digital currencies. All these would mean institutional investors are taking Bitcoin more seriously, and increased institutional ownership would be a long term tailwind for digital currencies such as Bitcoin.
Another latest development is the IPO of Coinbase (one of the largest exchange platform catered to the buying, selling and storage of Bitcoin and other digital currencies.) What the IPO really means is more capital are being committed to the development of digital currencies and the associated infrastructure.
The supply of Bitcoin and other digital currencies are finite, while the institutional ownership may just be starting to boom. Of course, Bitcoin itself doesn't produce any value (similar to gold, silver, etc.), but that doesn't it cannot further appreciate in value. The increasing adoption of digital currencies as a storage of value / a medium of exchange would drive increasing demand, thereby driving the value of these digital currencies.
Increasing regulatory actions on Bitcoin is an incremental negative. I am looking forward to see how these different forces would react to drive the development (or un-development) of digital currencies.
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