Why are businesses from the financial and banking systems becoming more interested in cryptocurrency exchanges and wallets?

Over the past few months, there have been increasing rumors about Deutsche Bank, Visa, Binance, and a search engine operator Naver being interested in buying controlling stakes in Bithumb, South Korea's largest cryptocurrency company.

Back in September 2020, it was reported that the largest shareholder of the exchange, Lee Jong Hoon, put up for sale his 40% + stake in Bithumb. The prices from 430 to 602 million dollars were quoted then.

The competition for the cryptocurrency exchange is becoming more intense, which resulted in its trading volumes skyrocketing in recent months. And this happened after the return of the South Korean cryptocurrency trading "rush".

Let's recall that according to Fn News, Bithumb's unofficial market value is currently around 1.8 billion US dollars, even though the requested price is less than half the amount reported in the media last year.

Why are financial institutions becoming increasingly interested in the cryptocurrency market?

First case. According to Deutsche Bank's research, Bitcoin's market capitalization of over 1 trillion US dollars "makes it too important to ignore." Big players who are buying and selling BTC have "significant" market power. Thus, it is fair to call the largest South Korean cryptocurrency exchange Bithumb "a tidbit", the noise around which makes it even more attractive in the eyes of potential major shareowners.

Second case. An unforgettable and "very human factor" — some company founders believe in cryptocurrency. The volatility of fiat currencies and the events of spring 2020 have convinced many CEOs and investors of the need to get involved in the cryptocurrency market. A good example is the software company Microstrategy and its CEO Michael Saylor.

Microstrategy had a total market capitalization of below 1 billion dollars in early 2020. The company now owns over 2 billion bitcoins, which brings its market capitalization to just under 10 billion dollars. Saylor told Barron's in an interview last year that he sees Bitcoin as "a defense against money devaluation and inflation."

Why do many experts agree on this issue?

The fact is that usually, inflation rises along with the strengthening of the local economy. Most often it happens is due to the weakness of the local currency, which leads to higher prices for imported goods. The central bank tries to correct this by increasing interest rates to combat rising inflation, which makes the local currency more attractive compared to others.

However, in the current environment, rising interest rates may have the opposite effect. Especially for economies laden with debt, the consequences can be potentially catastrophic.

And the US bond market is clearly telling us that interest rates will rise. After all, the five-year break-even — a measure of inflation expectations calculated as the difference between five-year US Treasury bonds and inflation-protected securities — is close to its five-year high.

Besides, the dollar continues to fall, despite the increasingly obvious quantitative easing of the money supply.

Most of the bitcoin trading is nominated in dollars. Therefore, one of the reasons for its active growth is the increasing inflation of the US dollar. Although North American inflation averages 2% per year, recent spending on stimulus can significantly raise inflation and reduce the purchasing power of the dollar.

Thus, thanks to recent stimulus packages, the United States has added about 2.4 trillion dollars to the economy. This has led many to worry about the inevitable decline in the dollar's purchasing power and rising inflation.

Therefore, if the dollar falls without a corresponding fall in the value of bitcoin, the BTC / USD ratio will rise.

Cryptocurrency, and especially Bitcoin, is more than a new asset in portfolios. It personifies "the need for a new asset."

Bitcoin is unlike any asset we have seen before: software, decentralized governance, fragmented market infrastructure powered by technology developed by an unknown organization but supported by miners, developers, and validators distributed across many regions.

This makes it possible for many investors and company executives to view Bitcoin as a real means of protecting and preserving capital. And probably as a means of widespread trade in the future.

The debate about impending inflation and the importance of cryptocurrencies is gaining momentum in the media space. It is difficult to say if the largest financial companies are going to become "Bitcoin beneficiaries". However, we are already seeing an increasing interest in the cryptocurrency market, not only from large financial players but also many government agencies.