Crypto Slumber: Time To Wake Up?

How many times this year did we hope for stability in the crypto market?  Well, now we are having all the quiet and calm anyone could ever want. But what good is stability anyway? The answer to that question is easy: lots of things.  

For one thing we have learned that mass acceptance of crypto as a medium of exchange has been thwarted by the perception of wild gyrations in the price of Bitcoin.  Limited scalability thus far hasn’t helped. Imagine yourself as a retailer willing to accept payment in the form of Bitcoin. Two minutes after closing out a transaction the value of Bitcoin drops 5%. It takes over an hour to convert your Bitcoin to fiat. In that time the price drops another 3%.  End of story, you’re screwed.

Stability has another benefit.  It is a signal that speculators are out of the market leaving long term investors with the opportunity to read and digest fundamental news before reacting in a rational manner.

Of course if you are a day trader or swing trader, volatility is how you make you money or lose your shirt.  If you are a broker with access to the CBOE or other commodities exchange, volatility gives you a reason to talk your customer into trading Bitcoin futures contracts.

Restoring Calm

Taking a look at price movements over the past week, things look altogether quiet. At the time of this writing, Bitcoin is trading around $6555, essentially unchanged on the week.  Others like Bitcoin Cash, Ether and Litecoin are off slightly.

This tranquility in fact is not new.  For all the media headlines about huge losses and wild volatility in crypto, the last 8 months have been almost boring.  The price decline in Bitcoin since way back in February has been a mere 9%. That is nothing to brag about but it is nowhere near as bad as the fall from last December.  And remember Bitcoin is still up 50% from a year ago at this time.

All Hail To Yale

Are investors losing interest in crypto?  The reason for asking this question reflects the crypto markets seemingly indifference to some pretty positive news. First consider the news on Friday coming from Yale University.  When one the most conservative Ivy League universities announces they are part of a group seeking to invest $400 million in a new cryptocurrency fund, that is big news.

Among the more interesting details in the Bloomberg News report is the decision by Yale’s $30 billion endowment–the second largest among U.S. educational institutions to earmark a surprising 60 percent of its investment capital in 2019 for “alternative investments”.  Of course not all of that will go into any one asset class but that is not the key issue.

Institutional investors have been underperforming the overall stock and bond markets for some time and are looking to alternative investments as a means of getting ahead.  If a high profile institution like Yale is setting the stage, other big names will follow.

Ripple Making Loud Noise

In addition to the news from Yale, Ripple hosted a conference this week in SFO. It was a huge show complete with ex President Bill Clinton.  We all know how Clinton can captivate an audience, but here is something that is every bit as important. Here is how The Street reported the scene:

“Contrary to stereotypes of your average Bitcoin enthusiast, the week’s events brought out just as many Ferragamo-clad bankers as crypto cowboys. And they revealed an industry growing beyond its underground roots and angling to take on the establishment.”

This is not the type of loud publicity where some talking head is predicting Bitcoin will hit $25,000 by year end. These are serious business folks with lots of fiat to invest.

Even The Technicians Are Becoming More Bullish

It wasn’t long ago that the majority of headlines offered by technical analysts was doom and despair.  In fairness to all parties, they have been right. But after nearly nine months of base building (some would call failed rallies), the technical community appears to be turning the corner.  Just take a look at a recent headline. “The Bulls Are Wedging Out The Bears For Bitcoin”.  Evidence keeps building that the worst is behind.

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.