Not so much a price prediction, more a market structure view, but Colin Lambert believes the nature of trading in Bitcoin will change in 2018.
If you ever wanted to know the financial markets' equivalent of playing Russian Roulette, look no further than attempts to predict the price of bitcoin going forward.
There were not many who saw a decline in bitcoin at the start of last year, but even though there was a consensus that it was going up (and why wouldn't it when you have a limited supply trying to meeting increased demand driven by publicity?), no one remotely nailed the year-end of $16,000. the highest estimate of the price this time last year was probably around $2,000 - and even during the third quarter of the year when it rose past $4,500 no one was thinking a further quadrupling.
Uncertainty about regulations, a lack of trusted custodians and concerns about security are key factors that continue to deter many large financial institutions from trading cryptoassets, says Kevin Beardsley, a managing partner at B2C2.
Amongst these three factors, Beardsley cited the lack of regulatory clarity around cryptoassets as the biggest issue for these firms right now, pointing out that no major bank wants to clash with their regulators for trading in what is, relatively speaking, still a small marketplace.
“The large institutions are all waiting for the regulations to become clear, which is a very rational approach,” he says.
By Obi Nwosu, the CEO and co-founder of the cryptocurrency exchange, Coinfloor,
It has been a challenging financial environment for investors since the financial crisis, and difficult to achieve returns on deposits and short term investments. In response to this, many have been seeking alternative investment vehicles to diversify their portfolios. Bitcoin is never far from the media headlines – but what will it take to convert this volatile retail bet into a viable investment option?
The key lies in stablising its price. Cryptocurrency is, of course, decentralised, which means there is no central authority putting measures in place to govern its price or manage volatility. This instability is currently preventing cryptocurrency from acting as a store of value, and subsequently achieving its originally intended purpose as the future of money.
Traditional financial services firms, such as banks, are clearly poised to enter the crypto space, explained speakers at the Profit & Loss Forex Network New York conference.
“Banks are going to make so much damn money off of cryptocurrencies,” said Nikhil Kalghatgi, a partner at CoVenture, a firm that has a multi-strategy asset management platform for cryptoassets. “They're chomping at the bit, laying the pipe right now in order to get connectivity, to answer all the regulator’s questions.”
When thinking about the evolution of technology underpinning cryptocurrencies the key question, according Kalghatgi, is whether it has the potential to be an Internet-sized phenomenon. He pointed out that there was a clear gap between when people first heard about about the Internet and then started using it, and that cryptocurrencies could follow a similar adoption trajectory.
Profit & Loss’s latest OnTheBlock series featured a one-one-one discussion with former CFTC staffer Justin Slaughter, now a partner at Mercury Strategies, in which he provided an insider’s perspective on how cryptoassets are being viewed by regulators in Washington, DC.
P&L OnTheBlock: An SEC official recently said that the agency does not view ether[eum] as a security. Does this mean that the issue is settled and the SEC definitely won’t try and regulate it as a security now?
Justin Slaughter: What we are basically hearing is that there isn’t an explicit, major problem with ether as a security. They are not yet saying it's totally, absolutely, not a security.
AlphaBot has added performance data and analysis tools enabling investors to compare, portfolio build, and compile reports on more than 1,600 cryptocurrencies and tokens.
Launched earlier this year, AlphaBot helps allocators - including high net worth individuals, family offices and institutions - find and connect with investment platforms, hedge funds, data sources and other providers. Using AlphaBot, allocators can obtain fund performance and benchmarking data, then model, build and execute portfolios.
“As the cryptocurrency markets grow and mature, AlphaBot now is the only platform that allows for thorough research, analysis, and comparison of performance of crypto currencies along-side other investments including hedge funds, CTAs, and equities all in one place,” says Dmitri Alexeev, CEO of AlphaBot.
At the start of 2018, the total market capitalisation of cryptocurrencies was above $828 billion, with many predicting that it would only rise further. Now, that market capitalisation is below $130 billion and continues to fall. Meanwhile, the price of bitcoin is down to $3,688, a 42% month-on-month drop and 65% year-on-year.
But does the price action of cryptos tell the whole story in this space right now? And what are the implications of this bear market on liquidity?
After all, the Intercontinental Exchange (ICE) and Nasdaq both plan to launch new crypto trading platforms next year, while Fidelity is also set to launch an asset custody service in 2019. Trading volumes on the CME and CBOE bitcoin futures have ticked up even as (because?) the market price has trended down and there are still ETF proposals sitting on US regulators’ desks that could still be approved.