Institutional investment in the cryptocurrency space has expanded in Q4 of 2018, even with the historic bear market. The Swiss SIX exchange now has a cryptocurrency ETP (similar to an ETF), and it has more volume than any other ETP on their market. It is comprised of Bitcoin, Ripple’s XRP, Ethereum and Litecoin. Another major institutional investment in cryptocurrency comes with the Nasdaq’s launching of Bitcoin futures. With more evidence that large institutional investors and firms are interested in cryptocurrency, 2019 will be a banner year for investment in the cryptocurrency market.
When we look at the cryptocurrency market in 2018, we see carnage. The current marketcap for the cryptocurrency market fell from a high of $850 billion in Q4 2017 to a low of $122 billion in Q4 2018. Bitcoin has plummeted from $20,000 to a low of $3,500, and with a dominance of 52.3%, this asset drives the market. With statistics like that, one would expect large institutional investors with billions of dollars and successful platforms to scoff at the offerings on this digital market. This is far from the truth. VanEck Vectors, the Nasdaq, Goldman Sachs, the Swiss SIX and more institutions have been slowly crafting investment vehicles to capitalize on this extremely volatile market.
In 2019, we will see a cryptocurrency ETF, Bitcoin futures, institutional client cryptocurrency services at Chase and Goldman Sachs and further investment overseas. Due to the volatility of this market, expect to see some products OTC or held in ETN products that can be called in when prices fall.
World markets are down this year, with 90% of assets traded yielding negative returns. With large retailers going out of business and volatility increasing, a new investment class can function as a liquidity sponge and a hedge against equity roil. With interest rates increasing, the markets will sell off further. In theory, the cryptocurrency market should not react mechanically to increasing rates due to its deflationary nature. Wallstreet may be eyeing the cryptocurrency market for this reason.
Hold on to your digital assets or large institutions will get them cheap. Use that as your clarion call, and know that the more institutional investment, the more volume and the higher prices we will see in the investments we hold.
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