The bloodbath on the crypto market that we all witnessed last week swept away several hundred dozens of dollars of capitalization. The market sell-off and “hot news”, including the articles about Chinese crypto miners that are selling mining equipment ‘by kilo’, brought to life all kinds of speculations.
Last week we wrote about the possible reasons for the crypto capitulation. Now let’s talk about what to expect next. Take a deep breath and relax, this is a long story.
I do not know how much Bitcoin will cost by the end of this year or by the end of June, 2019. But some people seem to know: they expect the price to be anywhere from $2500 to $25,000. You can read their predictions here, here and here.
I am not so brave to make my own forecasts, but I would like to remind you several well-known stories. The first is about the tulip mania in the Netherlands when fortunes were lost after the bubble burst. Still, the Netherlands remains the biggest market of tulip distribution.
The second story is about the first banknotes that were issued in Stockholm also in the 17th century. The idea belonged to Johan Palmstruch, founder of Stockholms Banco. Unfortunately, the printed banknotes were not secured, and Stockholms Banco issued too many. Palmstruch was sent to prison, but soon was reprieved as the acknowledgment of the significance of his invention.
The other two cases are more recent: the bubbles on the dotcom and mortgage markets. In all the four cases the bubbles burst, people and corporations lost money, but after some time a new market emerged which is still flourishing. I would dare to propose that the developments on the crypto market will be similar. There will be several months (let’s hope that not years) of crypto winter, and then a new reality will emerge.
There might be some bad news on the ICO market in this new reality. “The ICO market is dead — over,” says Barry Silbert, the founder of crypto investment fund Digital Currency Group. But Bitcoin and cryptocurrency market are here to stay despite the bear market: “We’re 5, 6, 7, times through this now. The first couple of times you see your balance sheet drop by 80 percent, it’s kind of rough on the stomach. By the third or fourth time, you get used to it. Now we view this as a fantastic opportunity.”
“Somehow bitcoin has lived in a swamp and survived,” Jeff Sprecher, chairman of the NYSE and CEO of its parent company, Intercontinental Exchange. “The unequivocal answer is yes [crypto will survive].”
Institutional investors are knocking on the door
While crypto investors are nursing their wounds, a lot of interesting things are happening below the surface. According to Silbert, institutional investors have not slowed down, and “behind the scenes companies are being built that will provide infrastructure for them. Massive on-boarding might happen as early as in 2019, he says.
One of the game-changing developments was in October 2018 when Harvard, Dartmouth, MIT, Yale, and Stanford announced that their university endowments had started investing in cryptocurrencies.
And the University of Basel made the creator of ethereum, Vitalik Buterin, an honorary doctor.
Here are some examples of infrastructure that will soon be in use:
In January 2019 Bakkt, the cryptocurrency trading exchange owned NYSE’s parent company, opens a futures market that delivers physical Bitcoin to its investors. Its biggest rival, NASDAQ, will do the same in Q1 2019.
One of the biggest US crypto exchanges, Coinbase, has launched over-the-counter (OTC) trading for institutional customers. “We launched our OTC business as a complement to our exchange business because we found a lot of institutions were using OTC as an on-ramp for crypto trading,” – Christine Sandler, head of sales at Coinbase, said.
Fidelity Investments, one of the biggest asset managers in the world, is expanding its institutional crypto asset platform to include trading services for the top five to seven cryptocurrencies by market capitalization. Fidelity has 13,000 institutional clients, and they are interested in bitcoin and ether because they make up a large part of the current market cap, explained Fidelity Digital Assets CEO Tom Jessop.
Goldman Sachs, the biggest investment bank, has been clearing Bitcoin futures contract for its clients since June, said its CEO David Solomon. However, Goldman Sachs is not able to hold cryptocurrencies for its clients, because it needs regulatory approval to do this.
Bitcoin technology blockchain is also making gradual advance to the new sectors. The South Korea is completing its voting system on distributed ledger technology. And the United Arab Emirates want to conduct half of its government’s transactions on a blockchain platform by 2021.
And just one more figure to conclude. In November, when the trading volume was high, Bitcoin made over $8 billion a day, which is comparable of $12 billion per day for Mastercard, the second largest credit card network in the world.