Tsutomu Fujita, an adjunct professor at the Graduate School of Hitotsubashi University and the former vice chairman of Citigroup Japan, said in an interview with Nikkei that the low price of Bitcoin will encourage the cryptocurrency market to grow.
Contrary to popular belief, the former Citigroup executive said that the significant drop in the value of major crypto assets will not negatively affect the optimism towards digital assets in a major way as the fundamentals of the market remain the same.
Chances of Bitcoin Crash is Slim
In late 2017, when the bull market of cryptocurrencies was at its peak at around $800 billion, Fujita said he warned investors about a potential bubble. The market was growing at a pace that investors in the public market, who were mostly retail or individual investors, could no longer sustain.
Many analysts in the traditional financial sector anticipated the cryptocurrency market to fuel the next recession of the global economy if the market was to grow larger than a trillion dollars in valuation.
“At its peak, the market capitalization of cryptocurrency was more than $800 billion. I warned then that a major scandal would burst the bubble and its impact would ripple across financial markets. Fortunately, the decline happened quickly and the market cap did not stay large for long. It was not big enough to affect financial markets around the world. Now, with a total market cap of around $100 billion, it is safe to say that there is no systemic risk stemming from the cryptocurrency market.”
At the time, as the valuation of cryptocurrencies, even those with no working prototypes and active user bases, surpassed billions of dollars, investors and developers within the cryptocurrency market in the likes of Ethereum co-creator Vitalik Buterin also expected a potential bubble to emerge given the lack of progress most projects in the space had made until that point.
The market demonstrated an arguably irrational rally that was not proportional to the rate of the adoption of most crypto assets and projects and as such, the market became vulnerable to a major correction.
But, Fujita said that the low price range of crypto assets will not slow down or hamper the development of cryptocurrencies and blockchain technology, stating that the fundamentals of the asset class remain intact.
“I disagree with the common view that low prices will dent optimism in the industry and hamper the development of cryptocurrency. If the fundamentals remain the same, people should turn bullish when the price falls, right? You should not be participating in the market if falling prices make you a pessimist,” Fujita added.
In the long run, with adequate custodial solutions and strictly regulated investment vehicles, the former banker suggested that institutional investors could enter the market, which will increase the inflow of capital into the asset class and further stabilize cryptocurrencies.
The government of South Korea and industry leaders in regions like Japan and the U.S. have emphasized the importance of custody in cryptocurrencies and the merit of bringing in institutional investors into the market in the past two months.
As companies within the cryptocurrency ecosystem and institutions in the traditional financial market continue to build an institutional suite of products supporting Bitcoin as seen in the efforts of Nasdaq, Fidelity, and ICE, crypto assets could be solidified as an established asset class in the years to come.
Fujita added that the chance of a dramatic crash of Bitcoin or any other major crypto asset in the near future is slim, primarily due to the intensity of the recent correction of the market.
“That said, I think the chances of another dramatic crash are slim. At its peak, the market capitalization of cryptocurrency was more than $800 billion. I warned then that a major scandal would burst the bubble and its impact would ripple across financial markets,” he noted.
Killer Application of Crypto
In 2018, India received $69 billion in remittances, up around six percent from the previous year. China and the Philippines also recorded high remittances at $63 billion and $32 billion respectively.
The high transaction fee involved in most international remittances, which is in most cases is a percentage-based number that drives up the actual amount of transaction fee, could push many expats and employees working overseas to digital alternatives such as crypto assets.
Based on the rapid growth rate of the global remittance market and the international trend that is shifting to digital and low-cost payments, Fujita heavily emphasized that remittance will be the most important market for cryptocurrencies.
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