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Why Bitcoin is going to be fine?

Next year, several key events will occur in the digital money market that can seriously affect the situation in the industry.

In 2018, the cost of cryptocurrency is continuously decreasing. Bitcoin has already fallen in price by 80% from $20,000 to $4,000. The total capitalization of the blockchain industry has decreased by 84%: it was $830 billion in January, and by the end of November this rate fell to $130 billion.

Recently, interest in cryptocurrencies began to grow again and rose to April values. According to Google Trends, now most people are wondering whether "the crypto bubble has burst", whether the current situation will lead to digital money depreciation and surrender - market sentiments are not the most positive. However, Bitcoin has repeatedly dropped sharply in price, and if you compare its chart for 2018 with the rates for 2014, you can see that the industry is now in a similar situation as it was four years ago.

However, this only concerns the cost of cryptocurrency. A lot has changed since then in terms of market development: governments began to regulate the blockchain industry, and some of them has banned it at all, such as the Chinese authorities. Large financial institutions constantly report plans for launching products related to digital money, but the industry is only at the beginning, so there are many obstacles that prevent companies from entering this market.

In September, representatives of large Russian banks declared their readiness to work with cryptocurrencies, but they cannot start providing such services due to the lack of regulation in the country. They reported high client interest in digital money, as well as active testing of the blockchain technology.

Many large organizations are preparing to enter the cryptocurrency market in 2019. These events can significantly change the situation in the industry, and the price of Bitcoin will rise sharply again, financial analysts at FXOpen say.

Bakkt

Intercontinental Exchange (ICE), a New York stock exchange, is preparing to launch Bakkt - a platform for institutional investors. Its first product will be Bitcoin futures with a physical asset supply. The platform was supposed to start on December 12, 2018, but due to the large influx of customers, the start had to be postponed to January 24, 2019.

At the end of November, Kelly Loeffler, the CEO of Bakkt, said that the current value of Bitcoin does not matter for the company. In her opinion, it is now important to eliminate the missing infrastructure elements and unrealized application scenarios, which will positively affect the development of the industry.

Fidelity

Fidelity Investments, a financial services corporation, which manages assets at the amount of $2.1 trillion, launches a cryptocurrency unit. The organization is not going to open an exchange for digital money trading, it is preparing to release products for storing large assets of institutional investors who are interested in the industry.

According to Tom Jessop, the head of Fidelity Digital Assets, market analysts, hedge fund managers and family capital management units are actively involved in the development of cryptocurrency products and tools. Due to this, the situation in the industry can change for the better, the expert believes.

Bitcoin-ETF

The US Securities and Exchange Commission (SEC) is studying a request to launch Bitcoin-ETF from SolidX, a cryptocurrency start-up, which submitted it back in March 2016. In June 2018, a large company, VanEck, joined it. At the moment, the regulator has not yet made a decision on this issue, it must respond until March 2019.

According to many experts, this is a very important event for the cryptocurrency market. Ric Edelman, an investor and financial consultant from Wall Street, thinks so. According to him, after the approval of cryptocurrency ETFs, the market situation will change, and it will cease to resemble the “Wild West”.

According to Gabor Gurbacs, the director of digital asset strategy at VanEck, a new instrument may be approved in the near future, the company has never been so close to the positive verdict of the regulator. Hester Pierce, the SEC representative, takes the same view. She believes that the agency should be more loyal to bitcoin-ETF, while Jay Clayton, a chairman of the Securities and Exchange Commission, said that this is possible only after the problem with fraud is solved in the market.

Nasdaq Futures

In late November, the media reported that Nasdaq, one of the largest stock exchanges in the world, is preparing to launch futures for the first cryptocurrency in cooperation with VanEck. The new product, which will be focused on the spot price of Bitcoin from many exchanges, unlike CME and CBOE, which use information from four and one platforms, respectively, will be launched in the first quarter of 2019.

Gabor Gurbacs, VanEck’s director of digital asset strategy, confirmed this information and stressed that if 2018 is considered the year of regulation, then 2019 will be the year of implementation. He said that the new product is regulated futures contracts of 2.0 version.

After the opening of futures on the Chicago stock exchanges in December 2017, the value of the first cryptocurrency reached a historic high of $20,000, and in January 2018 the capitalization of the industry exceeded $830 billion.

Services from large banks

Many large banks, such as Goldman Sachs, Morgan Stanley, CityGroup and others are preparing to launch cryptocurrency futures, derivatives or simply provide their customers with access to digital money. In late October, the network reported that Goldman Sachs had already started attracting customers to launch Bitcoin derivatives, which would be similar to CME and CBOE futures, but would not be traded on stock exchange.

In early November, Morgan Stanley published a report calling Bitcoin "a gold mine for institutional investors". Also in September, Bloomberg, citing anonymous sources, wrote that an international investment bank is preparing to launch swaps for the first cryptocurrency. Now the company already has the technology to launch a new service, now it is studying the demand for it among large customers.

In mid-November, Bart Smith, the head of the cryptocurrency division of trading giant Susquehanna, said that the launch of products from Fidelity and ICE would help to increase the liquidity of Bitcoin and attract significant funds to this space, which will positively affect the market development. The same opinion is shared by Sonny Singh, BitPay’s commercial director, who is confident that these events will again raise the price of the asset next year, and it will cost between $15,000 and $20,000 during 2019.

Why Bitcoin is going to be fine?
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Greg Nilson

Greg Nilson

Financial Analyst

FXOpen

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Charlestown

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.


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