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Price Collapse?! Positive Sentiment, Bakkt & ETF Timing Point To Something Else

Cryptocurrency markets have been rocked this week by a level of widespread volatility that contrasts sharply against the sideways trading of the past few months.

2018 as a whole has been a period of natural market contraction, which followed on from the prevailing surge in popularity and valuation of cryptocurrencies in 2017.

Last year’s bull run was led in no small way by the meteoric, media-fuelled rise in the value of Bitcoin from $980USD in early January to an all-time high of $19,600 at the end of the year.

But now, with focus being on a rift within the ranks of Bitcoin Cash as a major factor in this weeks downtrend, we look a bit deeper into the state of affairs within the industry in search of perspective as to whether this week’s events are actually, just business as usual.

 
business as usual

No Shortage of Public Supporters

Contrary to the doomsday predictions of a number of long-term skeptics of the potential of Bitcoin and other cryptocurrencies, a chorus of positive public reflections on the current situation from key players within the industry presents an alternate, high-level overview of the significance of this week’s events.

Susquehanna Digital Asset Head, Bart Smith, stated today on CNBC that “every great idea is volatile”.

Smith also drew attention to the effect that a lack of “on-ramps for new capital” is having on downward price pressure in 2018, following that “if you’re a global institution it’s still very difficult for you to buy Bitcoin the way that you might want to”.

The Susquehanna Digital Asset chief also astutely pointed out that currently liquidity within the market is constricted, and there is a lack of efficient and secure avenues for institutional money to enter the crypto market.

Under these conditions, he explains, events such as last week’s Bitcoin Cash hard-fork can lead to instability and asset selling that is not able to be absorbed by the levels of liquidity being seen in the market today.

Smith’s comments come at a time in which the launch of a range of long-awaited mechanisms to facilitate institutional investment into cryptocurrency markets such as Bakkt and the first Bitcoin EFT have been announced and are imminent.

Others within the industry have also echoed sentiments which focus more on the long-term.

Speaking with Bloomberg, Blockchain Capital partner, Spencer Bogart stated yesterday that “sure, Bitcoin’s down 75% this year, and up 400% over the past two years. So I think time horizon matters a lot here”.

Founder of BTCC and long-term Bitcoin advocate, Bobby Lee, has echoed similar sentiments in a tweet yesterday which highlight the mentality of industry investors who are banking on Bitcoin’s utility developing further in the coming years:

 

“This bear market might last another 18+ months, until the next block reward halving. That’s a long time for everyone except true believers. Enough time to scare away all of the weak long positions. Especially those on margin or those on the fence!”

 

One way that some pundits within the mainstream media have assessed this week’s price actions is as a confirmation of cryptocurrency being a “failed experiment“.

While this sentiment may resonate with those newer to the cryptocurrency market, a long-standing total of the number of times Bitcoin has unsuccessfully been declared as “dead” currently sits at around 320. The record of media articles acts as a testament to the difficulty of understanding the workings of the cryptocurrency market based upon a narrow view of the current price alone.

It’s easy to take the recent drop in price within the market on face value, without context, and without factoring in the past and future of cryptocurrency.

As well as this being a week of volatility in the markets, it’s also a week in which two developments that underpin the concepts voiced by Bart Smith are quietly preparing in order to create new financial superhighways between crypto-markets and mainstream finance.

 

Bakkt

According to the initiative’s website, Bakkt is:

“designed to enable consumers and institutions to seamlessly buy, sell, store and spend digital assets. Formed with the purpose of bringing trust, efficiency and commerce to digital assets, Bakkt seeks to develop open technology to connect existing market and merchant infrastructure to the blockchain.”

According to many within the industry, Bakkt will be a game-changing development.

Bakkt is owned and operated by the Intercontinental Exchange (ICE), which also owns and operates the New York Stock Exchange. According to a press release via Business Wire, it will act as “an open and regulated, global ecosystem for digital assets”.

This is the first major step to providing the multi-trillion dollar global finance industry efficient and reliable access to cryptocurrency markets. What’s more, fears amongst institutional investors of the security in storing crypto-assets will be mitigated by including a warehousing option, almost certainly based around advanced cold storage technology.

In a Medium release yesterday, CEO of Bakkt, Kelly Loefller, confirmed that January 24th 2019 has been set as the target date for launch.

 

Swiss Crypto ETP

 
six exchange

Earlier this week it was announced that the world’s first Bitcoin ETF will be launched in Switzerland in the coming days.

An ETF is an ‘exchange-traded fund’, or marketable security that tracks a stock exchange, and a Bitcoin ETF has been long awaited by many in the Bitcoin community as the first meaningful step to integrating opportunities for mainstream financial investment.

The Swiss Exchange, Six, and Amun AG, have partnered to provide a vehicle for traditional investors to access the opportunities within the crypto market.

A share of 48% of the ETF’s assets will be invested into Bitcoin, with another 30% being diverted into a combination of Bitcoin Cash, Litecoin, Ripple’s XRP and Ethereum.

This move further cements Switzerland as a global hub of cryptocurrency adoption, following on from being the pioneer in the design of legal foundation entities which launched the ICO boom of 2017, as well as being the home to a now-renowned centre of industry activity, “crypto-valley”, in Zug, Switzerland.

 

The recent downward price action.. in context

This week’s new additions to the “Bitcoin is dead” list may finally be yielding a degree of accuracy, although we doubt it. What can very clearly be seen from the markets, however, is that price actions over the last week have been rough for investors and ‘hodlers’ alike.

Perhaps for some, the coincidence of this week’s price drops creating an ever improving entry point for behemoth institutional investors, and the launch for the first time of the mechanisms required for the safe and efficient interaction with the same markets, may seem quite pronounced.

Saying that, there is of course a raging war being held within the ranks of Bitcoin Cash, and there are other significant factors to consider that are undoubtedly effecting an extension of this year’s downwards trend also.

When looking at the history of the market, it has been a continuous cycle of almost identical trends, magnifying in size over time, but essentially repeating reminiscent technical and psychologically-driven patterns.

Two things are for sure. This is a dramatic time of transition for cryptocurrency, and that within the coming weeks there will be a number of doors opening which have been long awaited by parties on both sides of those doors.

Not often have two such distinct paths for the near-term future of the cryptocurrency markets been presented in such high-resolution.