Bitcoin has been in the headlines a lot lately. Whether it’s PayPal announcing support for crypto or Tesla adding $1.5 billion of BTC to its balance sheet, the world’s best-known digital asset is starting to attract the sort of mainstream coverage that once seemed fanciful. With renewed interest from both institutional and everyday investors, it’s natural to wonder where bitcoin is headed. To the moon, as its proponents claim? Or will somewhere closer to Earth suffice?
Joel Edgerton, the Chief Operating Officer (COO) of San Francisco-based crypto exchange bitFlyer USA, is unsurprisingly bullish about bitcoin – and many other virtual currencies besides. The only cryptocurrency platform in the world licensed in the US, EU, and Japan, bitFlyer is a regulator-friendly venue that features a professional-grade trading engine built by Wall Street veterans. According to Edgerton, bitFlyer remains true to the ethos of Bitcoin while also enabling traditional investors and hedge funds to enter the crypto space and strengthen its value proposition.
Why more people are buying bitcoin
Bitcoin has well and truly paid its dues, and despite flak from all the usual sources, it’s now perceived as a compelling investable asset – one routinely used to rebalance portfolios formerly composed of bonds and equities. Bitcoin’s rise from the depths of $3k a year ago to around $54,000 at the time of writing is nothing short of phenomenal, says Edgerton.
When Bitcoin’s market capitalization surpassed $1 trillion for the first time, it gave even the naysayers pause. Soaring prices provoked frenzied activity here at bitFlyer, as many altcoins enjoyed tremendous gains in bitcoin’s wake.
The attitude of newcomers is easy to fathom, of course: they hear friends or family members talk about bitcoin, they learn that Tesla and MicroStrategy are buying up enormous sums, and then they learn that bitcoin is a bonafide hard currency – unlike fiat. A report recently leaked from Citibank showed that a senior analyst believes bitcoin could hit $318,000 by the end of the year. While it might fall well short of that figure, for many, buying bitcoin is preferable to storing wealth in a super low-interest savings account.
As for institutional players – the NYDIG just raised $200 million in growth capital from partners including Morgan Stanley, New York Life and MassMutual – we are seeing a domino effect, says Edgerton. Don’t get me wrong, some genuinely believe in bitcoin and love what it brings to the table in an era of mass money-printing. But others simply take the approach that it’s best to incorporate bitcoin on their balance sheet – because they might look silly later on for not having done so.
Robinhood brouhaha pushes traders towards crypto
The GameStop scandal, wherein popular trading app Robinhood prevented customers from buying shares, provoked a congressional hearing and compelled many traders to explore alternatives. According to Edgerton, the event exposed fissures in the traditional financial system.
I’ve been very critical of Robinhood in the past, specifically with regards to their lack of customer protections. Last year, a young trader on their platform committed suicide after falsely believing he had gotten himself into huge debt trading complex options contracts. From the outside looking in, this seemed like such a preventable tragedy: allowing novice traders to access highly risky financial instruments without safeguards is a recipe for disaster.
As for GameStop, the event proved to be a perfect storm that pushed many users towards decentralized cryptocurrencies and platforms, where the powers-that-be couldn’t hit a kill-switch to halt trading and protect those on the other side of the bet. Of course, regulations are still important. bitFlyer USA recently received a license in Connecticut, meaning we are now regulated in 48 U.S. states. Soon, it’ll be all 50.
As COO of a centralized trading platform, is Edgerton worried about the growth of decentralized finance (defi) platforms? Specifically decentralized exchanges (DEXs) like Uniswap and Sushiswap?
I believe CEXs and DEXs can coexist, he says. Cefi is still the king in terms of liquidity and security, while defi has plenty to offer in its own right, especially in terms of offering automated financial services. As it stands, what we are seeing is that major institutional players favor CEXs like bitFlyer due to their high-speed trading engines and legal stability.
Regulation for the good
In my view, crypto needs structured regulatory frameworks to ensure safety, fairness and transparency, and to elevate the reputation of the industry as a whole. In the past, projects have been fined for conducting unregistered securities sales while exchanges have faced accusations of wash trading. Some regulators have also banned derivatives for retail investors.
I don’t agree that introducing regulations compromises bitcoin, because the properties that make the asset attractive – its finite supply, its state-free status – remain. If properly implemented, regulations will help to reduce scams and ensure consumer protection in an industry that is, after all, still evolving.
It’s a little too early to say how incoming Treasury Secretary Janet Yellen will influence industry regulation. Certainly she has noted a need to legislate to prevent illicit usage of bitcoin, which is to be expected. But it’s definitely good to see some crypto-friendly figures taking executive roles in Biden’s administration – former Ripple advisor Michael Barr looks likely to head up the Office of the Comptroller of the Currency (OCC), for example, while Hester Peirce remains S.E.C. Commissioner.
Charity starts at home
Though philanthropy seems a million miles away from the rampant market speculation facilitated by bitFlyer, Binance and Coinbase, Edgerton is keen to draw attention to worthy causes. Bitcoin has enriched many of its early adopters, he says, accelerating a transfer of wealth to a generation of tech-savvy individuals keen to make a better world. That’s why we are seeing NFT charity auctions, and exchanges donating a percentage of their fee revenue to non-profits.
As well as that, we are seeing everyday users donate in crypto rather than fiat. Fidelity Investments’ gift fund, Fidelity Charitable, received almost $30 million worth of donations in cryptocurrency last year. At bitFlyer, we have our own crowdfunding portal, fundFlyer, that lets people raise funds in bitcoin to finance worthy initiatives. Our latest initiative was to build a school in Ghana, and the community came together to raise over 10 BTC – over half a million dollars at the current price!
Honestly, it’s a great time to be working in crypto, says Edgerton. While that statement would be true in any bull market, this one is institutionally-driven and the direction of travel has never been clearer. We are seeing private banks launch trading and custody services, and assets like bitcoin and ETH gain additional utility due to, for example, fiat on/off ramps and merchant acceptance. While peering into the crystal ball is a futile pursuit, the positivity pervading the industry right now augurs well.