Crypto-focused Coinsilium (AQSE:COIN) is being pushed forward on a wave of growing Bitcoin prices.
The London firm has pivoted hard into the rapidly-growing field of DeFi, or cryptocurrency finance.
And this sector is white-hot right now. The total value of the DeFi market has rocketed from under $1bn to over $11bn in a little under six months.
And ever more investors are being drawn towards DeFi as the price of Bitcoin, the world’s largest cryptocurrency, expands.
Where the Bitcoin price stands
Today, the price of a single Bitcoin (BTC) is near 12-month highs at $11,526 or £8,800. The cryptocurrency surged passed the psychologically-important $10,000 mark earlier this year and has not looked back since, breaching a multi-year resistance ceiling at $10,500.
At the time, market analyst Joseph Young, for Forbes, explained how sentiment is growing increasingly bullish given the previous asset price consolidation for multiple months below a significant resistance level.
Clearly, crypto finance platforms like the kind being built by Coinsilium will benefit strongly from larger user bases as these prices provide long-term market support.
Structural issues in the world of fiat, state-backed currencies like the British pound and the US dollar continue to play into Bitcoin’s hands.
As asset manager Grayscale explains: “To ease the shock on falling asset prices, save businesses on the brink of default, and support the newly unemployed, central banks are injecting enormous levels of monetary and fiscal stimulus into the system. With global debt at $255 trillion or 322% of global GDP, it’s unlikely that these accommodative policies will ever be reversed.”
The US Federal Reserve central bank, for example, has committed to printing trillions to shore up mainstream financial markets in the wake of the wholesale economic destruction brought forward by the pandemic. And interest rates will remain at near-zero levels until at least 2023, Fed chairman Jerome Powell says.
At the same time, major governments including the UK are for the first time exploring the possibility of introducing negative interest rates. The European Central Bank has had negative rates since 2014 and while it hails them as an outstanding success in boosting economic growth, the market’s reaction is more muted.
With cash now poised to cost investors money to hold, and so few asset classes offering decent returns, Bitcoin is becoming an ever more attractive option.
And this rush isn’t limited to retail investors alone. Institutions like pension funds, governments, university endowments, and hedge funds are all moving a portion of their portfolio into Bitcoin, stabilising the price above $11,000 per coin. 90% of institutional investors holding over $78bn in assets surveyed recently said they expect to dramatically increase the amount of Bitcoin they hold.
Other factors triggering the recent breakthrough price rally include the long-term fundamental factors at play for Bitcoin. May 2020 saw the fourth halving in Bitcoin’s history.
Part of Bitcoin’s code requires that once every four years the rewards given to miners for processing transactions and securing the network are cut in half. As this reduces the supply of Bitcoin it is a deflationary tactic and a measure of enforced scarcity.
As a scarce asset like gold, in theory this maintains Bitcoin’s price stability. It has certainly proven true over the last decade.
Price predictions consistently rate Bitcoin to hit $20,000 per coin by the end of 2020, and to keep rising exponentially by the end of the decade. Part of the confidence in these rising prices is that Bitcoin has a deflationary model built into its architecture, where fewer and fewer Bitcoin are introduced into the system every year.
The direct opposition between central banks and Bitcoin: quantitative easing versus quantitative tightening, is what will drive Bitcoin ever higher.
The addition of major regulatory clarity in previously wary markets is one final point that has triggered this Bitcoin price rally and puts Coinsilium’s decision to focus on crypto finance into sharper focus. The United States banking regulator, the Office of the Comptroller of the Currency, said in a legal opinion in late July that US national banks and federal savings associations were allowed to custody cryptoassets alongside all other traditional financial instruments.
Speaking to the Wall Street Journal, acting Comptroller Brian Brooks said: “From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial needs of their customers today. This opinion clarifies that banks can continue satisfying their customers’ needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency.”
It is difficult to underplay the significance of such a regulatory move.
Not only is it the driver behind a major new Bitcoin bull run — as the manager of the Wiltshire Phoenix hedge fund suggested to Forbes — but also the catalyst for a new appreciation for cryptocurrency across the globe. Such a state of affairs bodes extremely well for Coinsilium and its army of investors. Again, the London-listed firm just happens to be in the right market, with the right partners, in the right place, at the right time.