The rise and current situation of BTC

In 2024, the price of BTC reached $93,000, more than double the previous year. However, this rise is no longer about breaking away from the existing financial system, but about flourishing within it. Two years ago, the collapse of FTX and the big dump in Cryptocurrency prices left the future of BTC hanging by a thread. Interest Rate rise, frequent scandals, and endless suspicions have plunged BTC into a crisis. Regulatory agencies have sensed blood and critics have called it a bubble. BTC's grand vision - peer-to-peer transactions without intermediaries - seems to have already become a thing of the past.

Source: TradingView Bitcoin has repeatedly hit new highs this year, rising 135% compared to the low point at the beginning of the year.

Wall Street's Entry and the Mainstreaming of Bitcoin

However, the current situation is that Wall Street is enthusiastic about BTC and sees it as a new investment target. Financial elites seem to have 'hijacked' BTC. BlackRock's BTC Spot Exchange Traded Fund (ETF) has accumulated billions of dollars in assets. Retired funds in the UK and large asset management companies in the City of London have also joined in. BTC is no longer a weapon of rebels, but a trophy of the institutions it originally wanted to disrupt.

This is not an endorsement of the BTC concept, but a pursuit of money. Wall Street does not care about Decentralization, they care about transaction fees. BTC has become a product, placed under the control of central systems that almost all US stock trading is under—such as Depository Trust & Clearing Corporation. Ironically, those who once shouted 'down with the banks' are now working closely with the banks. BTC itself has not changed, it still has no Intrinsic Value, does not generate income, and its price is still driven by retail speculation. However, financial advisors urge clients to include it in 'modern' investment portfolios.

Lack of regulation and potential risks

This trend is alarming. Retirement funds are starting to get involved with BTC, and trustees feel the pressure of following the trend. Even small-scale cryptocurrency allocations can have a chain reaction on institutional investment portfolios in the next market downturn. And where are the regulatory agencies? The answer is a lack of consistency. Regulators are still exploring, with no unified approach to BTC risks. Each institution is doing its own thing, leaving significant vulnerabilities for Wall Street to exploit.

The lack of transparency in financial products is also unhelpful. Many investors have no idea how institutions handle their assets. In addition, the next US government may relax regulations, leading to a more unstable environment. Imagine, in the absence of regulation, institutional players package BTC into complex financial products. When the next cryptocurrency crash occurs, these products may have already infiltrated retirement accounts and pensions, reminiscent of the subprime mortgage crisis. The issue is not whether it will spread, but when it will spread.

Image source: Illustration from "encryption City", Illustration of U.S. Subprime Mortgage

The future of repledging with BTC

If the control of BTC by institutions is already bad enough, the emergence of 'stake' is even worse. In simple terms, 'stake' refers to the same BTC being used as collateral for multiple loans, just like a dollar being spent ten times, resulting in a house of cards. 'Stake' is a time bomb that, if a borrower defaults, will trigger a chain reaction and deplete the market's liquidity. The cryptocurrency crash in 2022 demonstrated the destructive nature of this practice. Many platforms involved in aggressive 'stake' faced liquidity crises, resulting in severe losses for investors.

The real problem is that investors are often kept in the dark. Most cryptocurrency lending platforms do not disclose their stake behavior, leaving people unaware of the risks. Once BTC is staked and lost due to mismanagement or hacking, it can never be recovered. This practice also inflates the perceived supply of BTC, suppressing its price. BTC is no longer scarce and seems to be everywhere, disrupting market dynamics and investor confidence.

The profit-oriented mentality of Wall Street has ignored technological advancements for short-term gains. As a key force in blockchain innovation, startups are being squeezed out of the market. What remains is a market that follows the status quo rather than breaking boundaries. Furthermore, high-frequency trading and algorithmic strategies - typical characteristics of institutional trading - intensify price fluctuations. Retail investors seeking stability may be forced to withdraw, leaving Bitcoin to speculators.

The future development depends on who holds the power. But one thing is certain: the soul of Bitcoin has been overshadowed by its price tag.

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'Hijacked by Wall Street! Is BTC deviating from its original intention, with retail investors possibly becoming the ultimate victims?' This article was first published in 'encryption city'