China and the Next Cryptocurrency Bull Market
Cryptocurrency experts from mainland China believe we are on the cusp of another bull market for digital currency, and it could be nationals from their own country who help drive the “fifth wave” of the market uptrend.
Chinese Investors Will Drive Next Crypto Bull Market, Experts Predict
In a recent interview with Tencent Technology, Sun Zeyu of Genesis Capital said cryptocurrencies are poised to continue higher in the fourth quarter as investors shake off the sentiment-laden collapses of the first six months of 2018.
Gensis Capital is a Hong Kong-based investment firm specializing in growth-stage internet companies.
Gao Kangdi of Metropolis VC told Chinese media that “the scale of the fifth wave of the crypto bull market may be far beyond our imagination.”
What these industry voices have in common is the belief that China will play a major role in the next bull market in spite of a nation-wide ban on the trading and mining of digital assets. They cite massive flows of capital into the blockchain and crypto ecosystem already underway in places like Singapore.
The tiny city-state is now home to thousands of foundations established by Chinese nationals. This has been corroborated by Chen Xianhui, a local agent helping Chinese nationals set up foundations in Singapore. According to Chen, most of these thousand-plus foundations are token investments funds.
Setting up a foundation in Singapore costs only 10,000 RMB ($1,561 U.S.) and takes just 15 days.
Singapore has emerged as one of the more favorable destinations for initial coin offerings (ICOs) and other market players. The Monetary Authority of Singapore (MAS) last month proposed changes to its current regulatory regime that will make it easier for blockchain-related exchanges to set up shop in the country.
Instability in Traditional Markets
China’s crypto analysts believe global financial instability and the growing trend toward risk aversion could play into the hands of digital currencies. Bitcoin is often posited as a non-correlated asset, which means it moves independently of the broader financial market. Although some observers noted a small correlation between bitcoin and stocks earlier this year, this was largely due to the influx of new crypto traders to the market.
While it’s far too premature to call for a bear market in global equities, a sharp rise in bond yields and growing instability in emerging-market currencies have been the source of significant tumult in recent months. The next critical test for equities will be the gradual winding down of crisis-era monetary policies.
The European Central Bank (ECB) announced Thursday it would put an end to its record bond-buying program this year. Meanwhile, the U.S. Federal Reserve is planning to raise interest rates two more times in 2018.
Bitcoin’s status as a safe haven has been contested by those who argue that virtual currencies have no intrinsic value. However, analysts at Goldman Sachs believe the opposite is true as assets like bitcoin continue to grow and mature.
In particular, Goldman Sachs analyst Zach Pandl has argued that bitcoin will follow a similar trajectory as gold in the long run as a low-return, hedge-like asset.
“We should stress that, as money, cryptocurrencies should have low expected returns in the long run, despite their high returns recently,” he wrote back in January. “Digital currencies should be thought of as low/zero return or hedge-like assets, akin to gold or certain other metals.”
Charles Thorngren, CEO of Noble Alternative Investments, believes bitcoin is also attracting a new type of investor – namely, equity investors who are looking for new options.
In an interview with Forbes, Thorngren said the following:
“The base of bitcoin has changed, in fact it has evolved, to a wider base of investors. People who have only invested in equities are now looking for options as the rumblings in the stock and bond market increase.
This new investor helps to establish a stronger Bitcoin market and adds legitimacy to the Cryptocurrencies as a whole.”
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.