After bouncing up, falling down and keeping investors on the edges of
their seats, bitcoin may be maturing into a period of relatively boring
stability, experts say.
A worldwide wave of regulation has led to a collapse in trading volumes.
Cryptocurrency advertisements are disappearing from top internet pages, and
bitcoin no longer dominates Google searches.
As investors try to figure out what bitcoin wants to be when it grows
up, the best-known cryptocurrency is going through somewhat of an existential
“It needs a new narrative,” said Nicholas Colas, New York-based founder
of investment research firm DataTrek. “There is every chance that if there is
some sort of institutional involvement, there could be a move higher.”
Bitcoin rallied 25 percent in April after crashing 70 percent from a
high near $20,000 late last year.
The cryptocurrency landscape has indeed changed. Mom-and-pop investors
who drove bitcoin’s skyrocket rise in 2017 have been pushed aside by government
bans on trading, and replaced by cryptocurrency funds, wealthy individuals and
established financial firms.
The bigger players can make bigger moves, but their trades are often
obscured by screens on over-the-counter (OTC) brokerages and matching
They are also less likely to chase sudden swings in bitcoin’s value,
being more interested in the potential of unproven but promising blockchain
Average daily traded volumes across cryptocurrency exchanges fell to
$9.1 billion in March and to $7.4 billion in the first half of April, compared
with almost $17 billion in December, according to data compiled by crypto
analysis website CryptoCompare.
Several exchanges saw their daily trading volumes drop by more than half
between December and March, including Bitfinex, Poloniex, Coinbase and
Bitstamp, the data shows.
Cryptocurrencies’ biggest-ever trading day was Dec. 22, when volumes
topped $30 billion, according to CryptoCompare.
On April 8, volume sagged to $4.6 billion, the weakest day since last
October, according to the data.
RESHAPING THE MARKET
The theory that bigger institutions will make bitcoin markets less
volatile and more liquid has grown as new OTC exchanges spring up, carrying
names such as Circle, Octagon Strategy, Cumberland and Kraken.
Digital exchange Gemini’s new block trading product allows high-volume
trades that will be invisible to other traders until the orders are filled.
Cumberland, one of the biggest block traders, has counterparties in more
than 35 countries and quotes two-way prices in about 35 crypto assets.
Gatecoin, a Hong Kong-based crypto exchange, saw retail volumes plunge
from peaks of $100 million a day last September, said Aurelien Menant, its
founder and chief executive.
But, he said, as institutional players enter the market, OTC trades
hidden from view have pushed up overall volumes in a way that doesn’t show up
in data. Gatecoin also operates an OTC platform.
Few institutions have gone public about their plans to trade
cryptocurrencies, and many asset managers say they still aren’t sure the
digital currency is more than a fad.
But a Thomson Reuters survey this week found one in five financial
institutions is considering trading cryptocurrencies in the next 12 months. Of
those, 70 percent said they planned to start trading in the next three to six
In the meantime, the price of bitcoin may be stabilizing, at least on
paper. The futures market BTCc1 shows bitcoin staying nearly flat - between
$8,900 and $9,050 - until September.
Gatecoin’s Menant, however, is considerably more bullish. He reckons the
currency might end the year above $100,000, but acknowledges that’s a gamble.
Joe Duncan, founder of Singapore-based Fintech firm Duncan Capital,
expects to see retail investors return to trading as governments slowly relax
their cryptocurrency rules.
“But bitcoin could still lose some market dominance,” Duncan said.
Thomas Lee, managing partner and co-founder of Fundstrat Global Advisors
in New York, said the bitcoin market is languishing in a “purgatory” phase
somewhere between a bear and a bull market. He predicted that could continue
until at least September.
One issue is that although many of the big institutions are curious
about how bitcoin’s underlying blockchain technology could revolutionize the
financial sector, bitcoin isn’t widely accepted as currency and has no
That, and the currency’s intense volatility, make it challenging for
investors to forecast a price.
Some analysts think bitcoin will retain a premium as a security, like
gold, in the digital world, while other cryptocurrencies are used for commerce.
Others see it as just another asset.
“One of the reasons to own cryptocurrencies is because they are an
effective hedge,” said Sam Doctor, a data analyst at New York-based Fundstrat,
a research firm whose founder is a well-known bitcoin bull predicting large
rises this year. “Until something happens to disprove that thesis, you aren’t
looking to sell them so long as other asset classes are falling.”
here for the original article from Reuters.