Crypto Psycho: Is the Tide Finally Turning?

Have you ever been to a social event where some goof is bragging about their investment winnings?  They go on and on how they called every turn in prices and now have a big house and a fast boat to show for it: boring! I have neither the flawless record nor the courage to try that trick.

But things seem to be going in the right direction so I desperately want to highlight a couple of themes that we have been writing about lately.  I use the word desperate because things change so quickly in the crypto world, and I may end up looking foolish tomorrow.

So here is the point. For the past few weeks we have sensed that the regulatory environment is gradually improving going from hostile to much more cooperative.

Also, there is the important issue of institutional investors.  These guys are poised to bring sizable new demand for Bitcoin and other altcoins. It is not just talk, it is happening.  Tools to facilitate this big new money were increasingly taking place. Information about this is finally getting notice.

The only missing link to higher prices has been the miserable investor psychology fueled in large measure by the big media outlets.

CNBC And MarketWatch To The Rescue

Glaring headlines today from CNBC: Bitcoin is up 20 percent in the past week, buoyed by news of interest from institutional investors and speculation that a bitcoin ETF will be approved by the SEC in August.

Then it was MarketWatch: Bitcoin breaks $8,000 — aims for further milestones. The writer points out how institutional money is pouring into crypto like a monsoon flood: “Grayscale Investments said it raised a record $250 million in the first half of 2018” and how investment giant BlackRock, the largest asset manager with trillions under their wing, is setting up a working group looking into blockchain technology.

Back on April 3rd, Bloomberg News reported how at least nine crypto-focused hedge funds were shuttered in the first quarter of 2018.  This was almost precisely the day that the April rally in crypto began. Some days it just pays to be a contrarian thinker.

Could this represent a sustainable change?  The next few days will tell us a lot, but remember what positive expectations did for prices late last year. So the potential rewards are worth raising the question.

The media is looking at real facts that should move the crypto psycho needle. On July 20 the CME announced Bitcoin futures average daily volume in Q2 grew 93% over previous quarter, while open interest surpassed 2,400 contracts, a 58% increase.  

Experts in futures trading will have differing views on the significance of a big open interest position.  There is no doubt however on the significance of rapidly growing interest in crypto futures.

They play a critical role in attracting institutional interest. Irrespective of the claims of the San Francisco Fed,  futures markets can help reduce volatility. And as Bitcoin futures prove themselves worthy of mainstream investors, futures markets for other altcoins will follow.  

The crypto psycho is even improving at Facebook who previously had ban advertising. On July 20th, Coinbase COO Brian Armstrong Tweeted: Proud to say we’ve now been whitelisted and are back introducing more people to an open financial system. Within two days Coinbase ads were reported on Facebook.  Once Facebook makes a move can Google and others be far behind? This is a crypto needle pusher.

The point of this is organizations like Facebook who have traditionally been tough on advertising content have now set up a screening method to guard against crypto scammers. In the end, this is all good.

Why does it seem like all good news as well as all bad news comes in bunches? We can thank the astute folks at for helping out with the following well timed report: IDC Reports 73% CAGR, Blockchain Spending to Hit Nearly $12 Billion within Five Years.

When you put $12 billion against a crypto market whose asset value between about $300 and $800 billion in the past 8 months, it is hardly overwhelming.  Nevertheless, it is a sign of both increasing mass interest and the value of the headline.

The Next Important Thing

So, what is the next big thing in crypto psycho?  Now that the SEC has deemed Bitcoin and Ether as “not securities” and other regulators like the CBOE and CME are getting crypto comfortable, the banks are the next domino to fall.  The big Wall Street firm Goldman Sachs is taking on a new CEO in October and new guy David Solomon is looking to develop crypto trading.

That may not sound like much if you are not familiar with Wall Street lemmings, but it is. Remember most investment banks today are owned by traditional commercial banks. Once one guy takes the lead, they all fallow.

Goldman is also behind Circle and its efforts to obtain a banking license. Circle is a payments focused startup valued at nearly $3 billion. The fintech company operates its peer-to-peer payment network using blockchain, the technology that underpins Bitcoin. Circle’s new USD Coin is meant to solve a key problem in digital currencies’ use case: Volatility.

There is much more to discuss on this topic and I hope to have more to share in the coming weeks.  In the meantime now that we have more of the media helping crypto psycho, if prices can just break through so important resistance points, the technical community will join the rest of us.  Let’s keep our hopes up.

Featured image courtesy of Shutterstock. 

James Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.