‘Financialization of Bitcoin‘ has been a topic of discussion; while no one has called it a ‘disadvantage’, it has not been a lot of an ‘advantage’ both. The query remains- ‘Is financialization a double-edged sword for Bitcoin’, as highlighted by Caitlin Lengthy.
Dan Held, director of Enterprise Improvement for Kraken Digital, in a latest podcast, opined that ‘Financialization of Bitcoin’ was nothing to be afraid of and that it will not hurt the cryptocurrency markets. He said
“There’s a lot of anxiety in this space around what happens when the institutions do come. I see it as some sort of an inevitable thing that will occur; it’s nothing to be afraid of[…..] First and foremost, different financial instruments like futures options and lending and borrowing are all normal market activities. They enhance price discovery, they enhance liquidity and they allow different operators in the crypto space or in Bitcoin specifically to hedge their risk.”
However how precisely will this flirtation between institutional gamers and Bitcoin have an effect on the highest coin’s price? This may be gauged by analyzing how issues performed out when the financialization of gold occurred. It is sensible as Bitcoin is called the digital gold. The dear steel was first financialized when central banks began issuing gold-denominated banknotes and this dates again to the 17th century and as seen, issues have performed out fairly effectively in regards to the financialization of gold; it’s thought-about the safe-haven asset throughout a monetary disaster.
Alternatively, there’s one other concern about Bitcoin’s financialization – The manipulation of price. When increasingly refined gamers enter the market, the probabilities of them manipulating the price are excessive and this was skilled in the course of the latest March market crash. Commenting on this, Held said,
“Whales have been a concern since 2012 for splashing around and causing really intense price gyrations. But as Bitcoin has increased in adoption and in terms of the number of liquidity[ bid-ask spread the depth of the order book and volume], the ability for a whale to influence the market has actually diminished; there are more market participants that they have to fight against.”
