Bitcoin at $100,000: the consecration of a financial revolution

Thursday, November 21, 2024

Bitcoin has passed the historic $100,000 mark, confirming its definitive entry into the elite of global financial assets. Buoyed by years of institutionalisation, hugely popular ETFs and growing popularity, it is now establishing itself as a key pillar of investment strategies.

5 December 2024 will go down in the history of the financial markets. For the first time, Bitcoin broke the symbolic $100,000 barrier. This figure, long seen as a fantasy or an unrealistic prophecy, now reflects a profound change. Bitcoin is no longer the marginal asset reserved for the pioneers of alternative finance. It has metamorphosed into a key pillar of investment strategies, driven by a process of institutionalisation that began nearly seven years ago.

A long road since 2017

To understand the scale of this moment, we need to go back to 18 December 2017, when the first futures contracts were launched on the Chicago Mercantile Exchange (CME). This event marked Bitcoin's first serious foray into traditional finance. While the asset was still seen as a speculative curiosity, this institutional recognition was a turning point. It paved the way for a more robust infrastructure, gradually reassuring professional investors.

But integration has not been linear. The market has seen bubbles, collapses, scandals and uncertain regulations. Yet each stage, each crisis, has strengthened the ecosystem, making it more mature and resilient. Coinbase's IPO on Nasdaq in 2021 has also helped lend credibility to the cryptocurrency industry as a whole.

ETFs: the 2024 boost

The real revolution came in January 2024 with the arrival of the first Bitcoin spot ETFs on Wall Street, approved by the SEC after years of hesitation. These index funds, offering direct exposure to Bitcoin without the technical complexity of holding it, democratised access to it. US institutional investors, such as pension funds and asset managers, were finally able to incorporate the asset into their portfolios, unleashing a massive flood of capital.

The snowball effect was not long in coming. Trading volumes exploded, and Bitcoin was quickly incorporated into diversified strategies. More than one million bitcoins, or around 5% of the maximum supply in circulation, are already held by US ETF issuers.

Dune - @Hildobby

As confidence grew, companies offered more sophisticated derivatives, culminating in the launch on 19 November 2024 of Bitcoin ETF options by BlackRock. These options now allow for fine-tuned risk management, overcoming the last remaining restraints of even the most conservative investors.

From worthless asset to financial pillar

Beyond the numbers, it is the very perception of Bitcoin that has changed. Once caricatured as a currency for cybercriminals or a volatile asset with no intrinsic value, it is now compared to digital gold. Its algorithmic scarcity - a cap set at 21 million units - makes it a credible store of value in a world where monetary policies are often perceived as inflationary.

But Bitcoin has gone further. It is gradually establishing itself as a strategic asset, capable of diversifying portfolios and withstanding geopolitical turbulence. Countries like El Salvador, a pioneer in its legal adoption, could be followed by other states that see Bitcoin as a tool for financial sovereignty.

What remains to be done?

With the $100,000 mark crossed, the question on everyone's lips is simple: what now? In institutional terms, the major milestones already seem to have been reached. The future will lie in even more seamless integration with traditional finance. Mutual funds, pension funds and even national reserves should gradually include Bitcoin, as seems to be taking shape in the United States.

On the technological front, the challenge is to support this mass adoption while maintaining the fundamental principles of decentralisation and security. Discussions around ordinary Bitcoin - without a smart contract or sophisticated execution layer - could also intensify, prompting a rethink of its positioning against competitors such as Ethereum.

In the longer term, it is the sustainability of its architecture that will have to show its robustness, as this is not guaranteed as rewards to miners decrease (in terms of the number of bitcoins) and revenue generated by transactions takes over (currently they represent a very small part of miners' remuneration).

The price has to keep rising for them to find an economic incentive to spend energy protecting the network.

>> Read: The big technical challenges ahead for Bitcoin

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This analysis is not investment advice. It has been prepared without taking into account your personal situation, particularly your financial situation, risk profile, and investment objectives.

Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial, and accounting advisors.

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