In December of 2017, the price of Bitcoin reached $20,000, and it seemed like suddenly the entire world was talking about cryptocurrency, with many getting ready to jump into the market. Then the price wobbled and went down…and down…and down. In early April the price was lower than $7,000. In the past week, however, there has been a noticeable uptick, and currently, bitcoin is just around $9,000. We’ve talked before about the factors that were driving the price rollercoaster. Let’s talk about what’s pulling the price of Bitcoin back up again, specifically institutional interest in cryptocurrencies.
Like the stock market, the cryptomarket depends heavily on consumer confidence. Up until this point in time, the market has been dominated by individual investors. When big figures in finance express interest in cryptocurrency, it has an effect. Individual investors’ confidence is buoyed. In early April there were two announcements: on April 6, Adam Fisher, the head of macro investing for Soros Fund Management got approval to trade cryptocurrencies, and on April 10, the Rockefeller family’s venture capital business, Venrock, announced their partnership with CoinFund. Since April 6, the price of bitcoin has been steadily rising. This is not coincidental.
Global and decentralized blockchains are clearly poised to have a huge impact on the economy at every level: personal, micro, and macro. We are watching a financial revolution unfold before our eyes. Institutions tend to be conservative with their investments, but the crypto asset class is not something they can afford to ignore much longer. They must wade in or risk becoming irrelevant. As governments attempt to mitigate the risk and uncertainty with regulation, even the most conservative institutions will become bolder with their involvement.
Goldman Sachs announced in late April that they had hired crypto trader Justin Schmidt, to be the head of their digital asset markets. His familiarity with cryptocurrency trading will be a considerable asset if the bank moves ahead with the launch of a bitcoin trading desk as they discussed last December. If they do move ahead with that plan, theirs will be the first major US bank to trade in cryptocurrencies. Others will soon follow.
Cryptocurrency is a newer field with complex underlying technologies, but bankers and investors have now had time to investigate and acquire the knowledge they need to make more considered choices, especially for the longer term. While individual investors may be content to speculate on the crypto market day-to-day, investment bankers must explain their choices both to their clients and their institutions. Bitcoin and other altcoins do not yet – and may not ever – conform to the same strictures traditional investments must in order to pass fiduciary laws. If there is big money to be made, however, Wall Street will find a way to get in on it. You can take that to the bank.
And if Wall Street gets involved in a very real way, the price of crypto will reflect it.