Bitcoin’s Shift Towards Respectability: Should We Be Concerned?

Bitcoin’s rise beyond $90,000 is a headline-grabbing milestone that highlights its growing acceptance in mainstream finance. However, this newfound respectability should be approached with caution. The very institutions Bitcoin was designed to bypass are now the ones driving its adoption, raising significant questions about its role and risks in the financial system.

The Institutional U-Turn

Bitcoin’s original goal was to create a decentralised, peer-to-peer financial system free from the control of traditional banks and intermediaries. Fast forward to today, and it’s clear the story has shifted. Major players like BlackRock have introduced Bitcoin ETFs, attracting billions in investment from pension funds, asset managers, and institutional portfolios.

While this might seem like a win for Bitcoin, it also changes the game. Institutions aren’t embracing Bitcoin for its revolutionary promise—they’re doing it because it’s another way to generate fees. Bitcoin is no longer an outsider; it’s part of the system it was meant to disrupt.

The Regulation Problem

This rapid institutional adoption is happening in a regulatory environment that’s patchy at best. While some markets, like the US and UK, have made moves to approve Bitcoin ETFs, they’ve done little to address deeper issues such as price manipulation, lack of transparency, and potential systemic risks.

For example, the trading of Bitcoin is still highly volatile and influenced by retail sentiment rather than fundamentals. There’s also little oversight into how institutional products are structured, meaning risks could be bundled into complex financial vehicles that are poorly understood.

MY ANALYSIS

To me, the current Bitcoin boom feels like history repeating itself. Just a few years ago, the collapse of FTX and the crypto market meltdown highlighted how fragile this space can be. Now, with institutions pouring in, the stakes are even higher. It’s not just tech-savvy retail traders who could lose big—it’s pension funds and large-scale portfolios, potentially affecting millions of ordinary people.

The push to include Bitcoin in portfolios as a “modern” asset seems premature. Bitcoin still doesn’t produce cash flows or have intrinsic value, making it speculative by nature. Sure, it’s a high-growth asset, but that comes with significant volatility and risk. Pension funds, in particular, should tread carefully. Chasing returns without fully understanding the risks could lead to serious problems down the line.

What worries me more is the potential for deregulation. If regulators fail to put proper controls in place—or worse, roll back existing ones—we could see a wave of poorly managed investment products hitting the market. The next crypto crash could be even bigger, with far-reaching consequences for institutional investors.

Final Thoughts

Bitcoin’s journey into mainstream finance is a double-edged sword. On one hand, it brings credibility and stability to a once highly speculative asset. On the other hand, it exposes traditional investors to risks they may not fully understand.

In my view, the financial industry’s embrace of Bitcoin isn’t about its revolutionary potential—it’s about turning it into another product to sell. Investors should remain cautious. The excitement around Bitcoin’s price surge shouldn’t overshadow the fundamental risks that still exist in the market. For now, Bitcoin remains a speculative asset dressed up in institutional clothing.