Blockchain specialists: does growing corporate interest in Bitcoin bring more advantages or disadvantages? | 03/28/21

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While interest on the corporate side is growing, US Treasury Secretary Janet Yellen recently criticized the volatility of the cryptocurrency, a shortcoming that has already been criticized by many. The increasing number of companies that are inclined to Bitcoin could bode well for the cryptocurrency – or maybe not?

• The interest of institutional investors and companies is increasing
• Bitcoin needs price stability for sovereignty
• Large Bitcoin investors could create problems

Bitcoin has already received more attention this year than it has ever been before. The entry of the electric car manufacturer Tesla, a new record high – one might think that overall a good run in the early years. But what does the interest of companies in Bitcoin entail? Is it moving the coin more and more in the direction of serious digital currency or is it creating a breeding ground for conflicts? Blockchain engineer Elaine Ou has put together some assumptions in a column for Bloomberg.

The safekeeping of Bitcoin

Elaine Ou, who works as a blockchain engineer at Global Financial Access, points in her column to the original purpose of Bitcoin: The cryptocurrency was developed to keep dependence on organizations low. Bitcoin has always relied on its fundamental characteristics of decentralization and anonymity.

But Ou mentions two points that question at least one of these properties: On the one hand, numerous small investors do not keep their coins themselves; instead, around 43 million users put their trust in the Coinbase crypto exchange. In view of the growing participation of companies in Bitcoin, it is also unlikely that “the finance departments of companies manage their own funds,” writes Ou.

Bitcoin – a social construct like money?

She also pays attention to the fact that Bitcoin is not to be understood as a physical coin, but as a business book. He needs a similar understanding among others. As money is a social construct, so is Bitcoin: “A medium of exchange has value when people accept it for things of value,” explains Ou in her Bloomberg column. It stems from the assumption that power over protocol belongs to those who are willing to “take BTC in exchange for goods, services, or get rid of ransomware.”

Interest is growing on the part of companies and institutions

With PayPal and Tesla, two world-famous companies positioned themselves for cryptocurrency – especially for Bitcoin. Sometimes has Elon Musk brought the possibility to the table that Tesla’s e-cars could be paid for with Bitcoin in the future. According to the blockchain engineer, this means that Tesla has “far more influence over the Bitcoin protocol than by simply owning Bitcoin worth $ 1.5 billion.”

At the same time, there is increasing interest on the institutional side. Even traditional finance houses are now working on strategies to participate in the crypto-verse – this includes MasterCard and Bank of New York Mellon.

Bitcoin needs price stability

But one of the biggest shortcomings that keeps many institutional investors and companies from opening the gates for cryptocurrency is the high price volatility. This rather negative quality was only recently put on display again when all coins gave way according to the statements of the US Treasury Secretary Janet Yellen.

Should the original crypto currency become a sovereign currency that actually does water should be enough, price stability is the still missing quintessence. Ou thinks that Bitcoin price stability can only come from the fact that “it is on the balance sheets of many institutions.”

Because the adoption of Bitcoin at company level is a testimony to the “maturity of Bitcoin”, writes the columnist on Bloomberg. However, this development could also mean that the interests of private or small investors could be neglected should future protocol disputes arise, according to Ou. From this point of view, the interest of companies in Bitcoin could turn out to be a mix of a blessing and a curse, as the title of the column already announced.

Finanzen.at editors

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Blockchain specialists growing corporate interest Bitcoin bring advantages disadvantages

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