Bitcoin Stems Decline for Now as Attention Shifts to Institutional Adoption
Bitcoin’s price stabilized on Thursday, as calm returned to the digital asset space following a rocky 48 hours. Despite the recent wave of volatility, bitcoin’s newfound stability in recent weeks could set the stage for greater institutional adoption in the future, according to a J.P. Morgan analyst.
The bitcoin price was virtually unchanged through the early part of Thursday’s session. Aggregate data from CoinMarketCap show an average price of $3,419.21 for a gain of 0.3%. On virtual currency exchanges, BTC/USD traded as low as $3,367 (Bitstamp, Coinbase) and as high as $3,451 (Bitfinex).
Bitcoin experienced a sudden pullback on Wednesday as crypto markets buckled under a new wave of selling. The leading digital currency fell by around 2%. As of Thursday, it had yet to recover from those levels.
Overall trade volumes have amounted to $5.2 billion in the last 24 hours. BitMEX, a cryptocurrency derivatives platform, accounted for 9% of the daily turnover. Spot markets made up the remaining 91%, according to CoinMarketCap.
Declining Volatility and Institutional Interest
Interest in bitcoin and other cryptocurrencies has waned since the bear market took root, but that could soon change as digital assets continue to stabilize and mature. That’s the opinion of J.P. Morgan analyst Nikolaos Panigirtzoglou, who recently told CNBC that stability is the key to unlocking institutional capital.
“The stability that we are seeing right now in the cryptocurrency market is setting the stage for more participation by institutional investors in the future,” he said. “The cryptocurrency market was a new market. It went through a bubble phase [and] the burst.”
Prior to the November selloff, bitcoin’s volatility index had fallen to its lowest level in nearly two years. The narrower price ranges made bitcoin more predictable for day traders and suggested that the era of boom-and-bust was gradually coming to an end.
That changed on the eve of the bitcoin cash hard fork in mid-November. From that point on, bitcoin and the broader market would undergo a steep correction that wiped out more than half of total asset values. Stable trading conditions have returned in recent weeks, with volatility hitting two-and-a-half-month lows.
The launch of bitcoin futures in December 2017 has been a positive catalyst for stability. The introduction of new futures markets in 2019 could provide further stability and serve as a launchpad for institutional traders.
According to Panigirtzoglou, the next crypto rally could be years away as regulators wrap their heads around the new asset class. However, it’s only a matter of time before Wall Street re-enters the space to capitalize on the growing utility of blockchain technology.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.