By Stefan Rust
Things are cheap in crypto right now. Bitcoin is back to around $20,000 – the all-time high from the previous bull run – while gas fees on the Ethereum network are at record highs. Do retail investors benefit though? No, no, they are not. Discouraged by recent price crashes and the relentless negative rhetoric and draconian rules of global regulators, they are staying away.
But you know who is not: institutional investors. Over the past week, more than 80% of bitcoin trading volume has been taken up by institutions lining up to short the world’s largest cryptocurrency. According to CoinShares Weekly, more than $51 million in inflows flowed into BTC short funds between June 27 and July 1, with institutions betting big against what was envisioned as, and really should be, the currency of the people. Meanwhile, in stark contrast, we are seeing a Bitcoin event in the UK aimed at educating families and young people about digital currency, including goat petting and Bitcoin basketball.
This, in a nutshell, is the current cryptocurrency environment. What was a grassroots movement designed to challenge the power of corrupt institutions has been taken over by those institutions that benefit at the expense of retail investors. This is a heartbreaking situation for those of us who have watched and rooted for cryptocurrency since its inception, and given the current global environment.
Inflation is now truly endemic globally. A quick Google search for “inflation” will show that there is almost no country in the entire world that is not facing record high inflation right now. Switzerland is facing inflation not seen in 29 years, while Turkey and South Korea are facing inflation at 24-year highs. And in the US, we have warnings that the already record price spikes are set to get worse over the next few months.
Since its inception, Bitcoin has been touted as a hedge against inflation. For those who bought at 2021 price levels, it’s a long shot. For others who have purchased at different times, this has proven true. As we know, in the rapidly changing environment of cryptocurrency, this situation can turn into a dime.
Cryptocurrency, however, remains the only place where average savers and investors have a chance to preserve and grow their wealth. Although decentralized finance does not offer the returns it was accustomed to, the use of stablecoins in this ecosystem continues to generate returns far superior to those available in comparable traditional finance products.
Indeed, while cryptocurrency and blockchain find themselves somewhat maligned at the moment, they remain the only spaces that innovate and seek solutions to structural financial challenges. Meanwhile, regulators and institutions continue to support and perpetuate a failing monetary system that only benefits them.
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