Federal Reserve Chair Powell: Bitcoin's Competitor is Gold, Not the Dollar; Crypto Market Sees Wild Swings, Over 160,000 Liquidations

Federal Reserve Chair Powell: Bitcoin's Competitor is Gold, Not the Dollar; Crypto Market Sees Wild Swings, Over 160,000 LiquidationsAnother Hong Kong-listed company, BOYA Interactive (HK00434), also drew attention due to its cryptocurrency holdings. On November 12th, the company announced that, as of the announcement date, it held 2,641 Bitcoins at a total cost of approximately $143 million (average cost of approximately $54,000 per coin) and 15,400 Ethereums at a total cost of approximately $42

Federal Reserve Chair Powell: Bitcoin's Competitor is Gold, Not the Dollar; Crypto Market Sees Wild Swings, Over 160,000 Liquidations

On December 4th, New York time, the CME Bitcoin futures BTC main contract closed at $98,780.00, up 2.33% from the previous day's close. At 4:49 AM Beijing time on December 5th (less than fifteen minutes before the US stock market closed), Bitcoin briefly surged near $100,000. Concurrently, the CME Ether futures DCR main contract reached $3893.50, up over 6.00% from December 3rd, hitting an intraday high of $3949.00 at 04:25. Cryptocurrency stocks also saw gains. At the time of publication, Bitcoin was trading at $98,350.8; Ethereum at $3802.55. Coinglass data revealed over 160,000 liquidations in the cryptocurrency market within the past 24 hours, highlighting the significant volatility.

At the DealBook/Summit conference hosted by the New York Times, Federal Reserve Chairman Jerome Powell delivered a significant speech on cryptocurrencies and the potential for a US Bitcoin national reserve. Powell emphasized that Bitcoin's competitor is gold, not the dollar. He likened Bitcoin to digital gold, stating that its widespread adoption as a payment or store of value is hampered by its high volatility. Therefore, he argued that Bitcoin is not a competitor to the dollar but rather competes with gold.

Notably, on the evening of December 4th, Meitu, Inc. announced it had sold all its holdings of cryptocurrencies, realizing a profit of approximately $79.63 million (approximately RMB 571 million). The announcement stated that Meitu had been selling its cryptocurrency holdings since November 2021, and by December 4th, had completely sold approximately 31,000 units of Ethereum and 940 units of Bitcoin, for a total cash consideration of approximately $100 million and $80 million respectively. The company's board recommended that approximately 80% of the net proceeds from the sale be used to pay a special dividend of HK$0.109 per share; the remaining net proceeds would be used as general operating capital to expand the group's image and design product business, primarily based on a paid subscription model. These cryptocurrencies were purchased in March and April 2021, at a total investment of $100 million.

Another Hong Kong-listed company, BOYA Interactive (HK00434), also drew attention due to its cryptocurrency holdings. On November 12th, the company announced that, as of the announcement date, it held 2,641 Bitcoins at a total cost of approximately $143 million (average cost of approximately $54,000 per coin) and 15,400 Ethereums at a total cost of approximately $42.5781 million (average cost of approximately $2756 per coin). The company's total market capitalization is approximately $230 million, while the market value of its Bitcoin holdings is as high as $226 million, highlighting the significance of cryptocurrency investments in the asset allocation of some companies.

Recently, market funds have been heavily increasing their Bitcoin holdings. On January 10th of this year, the first 11 Bitcoin spot ETFs in the US were listed, with a total asset size of approximately $28 billion. By December 4th, this size had nearly tripled to approximately $82 billion. BlackRock's Bitcoin fund, IBIT, is the largest ETF spot fund in the market, recording a record trading volume of $4.1 billion last Wednesday, followed by a net inflow of $1.1 billion the next day, setting a new record for the largest single-day capital inflow.

However, the price of Bitcoin has been highly volatile since its inception, with dramatic price swings being almost the norm. Several market risks cannot be ignored. Yu Jianing, co-chair of the Blockchain Special Committee of the China Communications Industry Association and honorary chairman of the Hong Kong Blockchain Association, pointed out that Bitcoin price fluctuations are influenced by multiple factors including market sentiment, macroeconomic conditions, technological innovation, and regulatory policies. Governments' attitudes and policies towards cryptocurrencies are constantly evolving, and any new regulatory measures can significantly impact prices. Furthermore, changes in the global macroeconomic environment, such as interest rate changes, inflation rates, and international trade relations, will also affect the value of Bitcoin and other cryptocurrencies. Currently, cryptocurrency trading platforms and wallets also face risks such as hacking attacks and security vulnerabilities.

In summary, the cryptocurrency market has recently experienced significant volatility with substantial price increases, but risks remain. Federal Reserve Chairman Powell compared Bitcoin to gold, highlighting its excessive volatility and arguing that it's not a competitor to the dollar. Meitu's sale of all its cryptocurrencies and BOYA Interactive's substantial Bitcoin holdings both reflect the opportunities and challenges present in the market. Investors need to closely monitor market trends, carefully assess risks, and develop sound investment strategies. Changes in regulatory policies, macroeconomic fluctuations, and technological security risks will continue to influence the future trajectory of the cryptocurrency market. The high number of liquidations also serves as a warning to market participants to remain rational, avoid blindly following trends, and practice effective risk management. Investing in cryptocurrencies in the current market environment requires greater caution, a thorough understanding of market risks, and investment decisions based on one's own risk tolerance. High returns often come with high risks, which is particularly evident in the cryptocurrency market. Therefore, investors need to enhance their risk education, improve risk awareness, and avoid significant losses due to information asymmetry or insufficient risk understanding. Continuously monitoring market trends and adjusting investment strategies accordingly is crucial for mitigating risks and achieving stable returns. It is also important to monitor changes in regulatory policies to better adapt to the market environment and make more informed investment choices. Ultimately, success in the cryptocurrency market requires investors to possess solid professional knowledge, keen market insight, and robust risk management capabilities.