In the US market, coinbase, which offers cryptocurrency transactions, will be listed on April 14. Coinbase achieved revenue of $1.8 billion in the first quarter of 2021, up from $1.3 billion in the whole of last year. The profit cap for the first quarter could reach $800 million. 56 million registered users, up from 43 million in the previous quarter. Such growth rate, revenue and profit scale far exceed the existing stock exchange. The main trading product of coinbase is bitcoin, which shows the popularity of bitcoin in the market.

In addition to the listing of coinbase, other market behaviors also indicate that the market is highly concerned about bitcoin. Some famous insurance companies, such as mass mutual, New York insurance company, Liberty Mutual and Starr, have started to jointly develop bitcoin based insurance products. Well known investment banks in the United States also began to provide bitcoin related business. The most radical is Morgan Stanley. Morgan Stanley is investing heavily in bitcoin's market infrastructure and providing services related to bitcoin to its wealth customers. In addition, as of today, nine applications for establishing bitcoin based ETFs in the US market have been submitted to the US SEC. These and other trends in the market indicate that the U.S. market is increasingly valuing bitcoin.

One of the market's judgments on the value of the special currency is that it is considered as a safe haven asset. And this view has its logic.

The rapid growth of bitcoin price can be said to start in March 2020. The monetary policy implemented by the Federal Reserve in order to rescue the crisis caused by the epidemic led to a large number of additional issuance of US dollars. The additional issuance of US dollars inevitably leads to the depreciation of US dollars and the virtual high value of all assets priced in US dollars. These assets include real estate and stocks. For institutional investors, they must consider how to deal with the real depreciation of their own assets brought about by such market development. They began to study alternative assets that could hedge such market risks. Among the available assets, the hedging value of bitcoin is gradually recognized by the market. With the increase of this recognition, more and more institutions and individuals begin to hold bitcoin. The hedging value of bitcoin is embodied in the following aspects.

First, bitcoin was designed as an electronic currency. It is designed to provide a monetary solution in addition to the existing legal currency. In its design, the total amount of bitcoin is fixed. This avoids the characteristics of additional issuance of legal currency. Moreover, the operation mechanism of bitcoin is automatic and not controlled by any organization or individual. The total amount of bitcoin and the mechanism for obtaining and using bitcoin are now automatic. In the past 12 years of development, as the transaction of bitcoin has become more and more common, the direct exchange transaction between bitcoin and legal currency has been formed. Bitcoin can therefore be priced based on a variety of legal currencies. As the use and transaction of bitcoin become more and more popular, it is now becoming a value storage tool and payment tool. Because of the above characteristics, especially the most basic characteristic of a certain amount of bitcoin, it can avoid such a mechanism of additional issuance of legal coins, thus forming a differentiated competition with legal coins. When there is a problem with the legal currency in the market, the capital in the market will naturally flow to a differentiated competitive product such as bitcoin.

In the aspect of differentiated competition with legal currency, bitcoin shows more and more differentiated characteristics in practice. When there is high inflation in some countries' currencies, the trading volume of local bitcoin will rise significantly. This is true in Argentina, Turkey and Nigeria. This shows that the market is accepting bitcoin as a tool to compete with existing legal currencies.

As a hedge asset, another basic requirement is its weak correlation with other mainstream assets. The smaller the correlation, the higher its value as a hedge asset. According to a recent report by coindesk, the correlation between bitcoin and gold and S & P500 tends to be zero, and it also begins to show negative correlation with the US dollar. Therefore, in terms of correlation with other assets, bitcoin has more and more hedging value.

In the current U.S. market, the increasing issuance of U.S. dollars has caused widespread concern about the depreciation of the U.S. dollar. Therefore, the market naturally chooses to hedge against the risk of the depreciation of the US dollar. The recent increase in interest in silver and uranium indicates this trend of risk aversion. Bitcoin has also become a safe haven for some individuals and institutions. Now the common practice of financial institutions is to use 0.5% ~ 1% of their assets to hold bitcoin, so as to hedge the market risk of the entire portfolio. Of course, for larger and more conservative financial institutions, such as mass mutual and black rock, they hold a smaller proportion of bitcoin in their portfolio.

At the other extreme of the market, there is also the phenomenon that Michael Saylor, CEO of MicroStrategy, borrowed money to hold a large amount of bitcoin. At the other extreme, there are naturally a large number of institutional and individual investors who choose gold or some types of bonds as safe haven assets instead of special currency. So in the U.S. market, the choice of bitcoin as a hedge asset is still in a very extreme continuum. However, judging from the current development of the US market, more and more funds will flow into bitcoin.

(2021-4-13)