While its not clear just what is happening – its even murkier when you’re english speaking and reading second and third degree sources. In times like this I think its best to look at the Bitcoin market itself. In trading there is a saying that the news doesn’t matter – its the reaction to the news that matters.
Here is the Chinese Bitcoin exchange Huobi as of this morning. I’d say the Chinese traders don’t see Armageddon on the horizon.
The Google Trend data for the “Bitcoin” topic has stayed in step with the Bitcoin Price for the last year. Quite interestingly the trend has fallen off yet the Bitcoin price has surged higher. Who is to say what it means, but its an interesting divergence.
Last week Bitcoin paid a “special dividend” (as I like to call it) “Bitcoin Cash”. As is well known anyone who owned Bitcoin during the hard for received new coin, bitcoin cash. Well, it seems to me that this new found money fueled quite a price rise in Bitcoin as presumably holders of Bitcoin sold some of their Bitcoin Cash and used those funds to invest in other cryptos. Its a bit like quantitative easing.
The CBOE is now launching Bitcoin Futures in a plan with the Gemini exchange. I am not certain what the implications are of this for the Bitcoin ETF that the Winkelvoss were working on. Launching Futures is a much easier task for the CFTC and/or SEC to wrap their heads around as the Future just has to track the Bitcoin price. Whereas with ETF the SEC has to figure out how actual trading and settlement of the Bitcoins underlying the ETF would work.
One could argue that the Bitcoin ETF would have had a much bigger impact on price that the Future. But inevitably there will be players in the market which are arbitraging Futures versus the underlying. This means more capital flowing into the cryptocurrency space. It also means more legitimacy for Bitcoin wherein regulators and stock exchanges are grasping and embracing the products.
The recent rise and fall of Bitcoin and Ethereum prices brought massive attention to the cryptocurrency space. While that fevered speculation created a short term price spike that proved to be unsustainable, the price move also put a spotlight on the viability of cryptocurrency from investment and technological perspectives.
The Recent Bitcoin Ethereum Price Spike was Fast Money
Fast money – money that floods in, speculating on price. Thats what pushed up prices not of just Bitcoin and Ethereum, but every other cryptocurrency over the last few months. Fast money leaves just as fast as it arrives. Fast money brings “weak hands”. These are speculators that don’t have conviction or a belief in what they are investing in. They freak out when price moves against them by more than a few percent.
Fast money tends to be smaller amounts. Why? Because if you are a large piece of the market you can’t liquidate that easily. For example, if you own 75% of all Bitcoin you’re going to have a much harder time selling that if you own 7 bitcoins.
While this recent price spike and subsequent drop probably burned a lot of people, it may have set the stage for much larger investment. Ethereum and Bitcoin were plastered all over the news, on CNBC, Wall Street Journal and the like. Coinbase, for example, had record account openings. These are people who figured out where to go to buy crypto (I’d argue thats not an easy task) and that paves the way for future investment. There are millions more people who now have not only heard of Bitcoin and Ethereum, but they will remember that they missed the boat last time. I’d wager they’re more ready to participate in future price ramps.
Big Money Is Coming to CryptoCurrency
Wall Street and major investment is moving to the cryptocurrency space. You see it happening all over, and that is money that is making real investment in cryptocurrency and that could help set a floor in Bitcoin and Ethereum price. This is money that takes longer to impact the price. Business plans, approvals, infrastructure all has to be built before actual money moves in.
I think this bodes very well for the future of cryptocurrency. Fast money “set the stage” for larger participation in the future. If Wall Street and other large corporations continue their push into the space that should “legitimize” crypto in the eyes of the public and could pave the way for more capital flowing in.