Institutional Investors move towards bitcoin

Discussion in 'Crypto Market News' started by The CC Forums, May 11, 2018.

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  1. The CC Forums

    Staff Member

    #1 The CC Forums, May 11, 2018
    Last edited: May 11, 2018
    From this front page article

    Despite bitcoin’s 2018 price drops, many regulated investment firms have either formally announced plans to enter the cryptoasset space or are rumored to be considering offering bitcoin and cryptocurrency trading to their account holders and customers. Let’s breakdown what we know about these bitcoin newcomers.

    Goldman Sachs to trade bitcoin instruments

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    Goldman Sachs was the first major financial institution to initiate coverage of bitcoin markets when analyst Sheba Jafari issued the first Goldman bitcoin market report in June 2017. Goldman Sachs continues to offer regular reports on bitcoin with price predictions. As a matter of fact, in a report issued for the week of May 7, 2018, Jafari is notably bearish on bitcoin, advising that price is in “jeopardy of returning to its Feb low of $5,922.”

    However, that bearish outlook isn’t enough to dissuade Goldman Sachs from offering bitcoin trading to its customers. For now, the firm will not directly own bitcoin, although it may later do so with regulatory approval. Instead, the company will trade bitcoin futures contracts with institutional money on behalf of its customers. The company recently hired Justin Schmidt for the role of “head of digital asset markets” as it prepares to launch complex derivative products in the next few weeks.

    While this is certainly a positive step forward for bitcoin and cryptocurrency in general, the news hasn’t resulted in much positive price action. There are likely many reasons for this, but most probable explanation is that GS won’t actually be buying, selling or holding bitcoin. Instead, they will offer futures contracts and derivatives from which they will certainly profit, but the activity likely will not increase market demand for bitcoin.

    Still, their announcement stands as a milestone for crypto markets, but a transition to direct bitcoin purchasing would be seen as a much stronger market signal. For now, we must await their next move.

    New York Stock Exchange may offer bitcoin trading

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    While hedge funds have been involved in bitcoin and crypto markets for several years, large regulated financial institutions have avoided buying and selling bitcoin. This could be set to change if ICE, the parent company of the New York Stock Exchange, opens its rumored trading desk. Retail investors have generally shunned cryptoassets, perhaps due to a lack of understanding of the legality and regulations surrounding bitcoin. However, the entry of a major player like NYSE could not only increase demand and open up potential markets to new investors, it would certainly improve the public’s perception of bitcoin and could further legitimize the cryptoasset markets.

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    Some may remember that the Chicago Mercantile Exchange began trading bitcoin futures in Q4 of 2017. But bitcoin itself cannot be purchased by CME and CBOE traders. The NYSE appears ready to change this. According to CCN, “Various reports revealed that ICE Exchange is not launching a futures market like CME and CBOE, rather a proper bitcoin exchange on which investors can buy, sell, and store bitcoin directly.” The New York Times reported that “The parent company of the New York Stock Exchange has been working on an online trading platform that would allow large investors to buy and hold Bitcoin, according to emails and documents viewed by The New York Times.”

    Although bitcoin can be easily purchased from licensed exchanges in many countries, many retail investors still question bitcoin’s legitimacy. The NYSE could change that by opening a trading desk. For now, the exchange plans are rumored but not confirmed. CNBC’s bitcoin analyst Brian Kelly expressed his surprise at the lackluster market response to the news by noting that the NYSE has cleared the biggest hurdle for institutional investors to hold bitcoin by developing a custody solution. “They have come up with a custody solution for institutional holders,” said Kelly. “That’s the big deal.”

    NASDAQ could follow NYSE lead, trade crypto

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    In late April, Nasdaq CEO toyed with crypto investors when revealing that the exchange could offer bitcoin and other cryptoassets for retail purchase and trading. According to Nasdaq CEO Adena Friedman, "Certainly Nasdaq would consider becoming a crypto exchange over time. If we do look at it and say 'it's time, people are ready for a more regulated market,' for something that provides a fair experience for investors." This according to a CNBC report covering the recently announced Nasdaq collaboration with the bitcoin exchange Gemini. The report goes on to say that regulation and clarification of the exact financial status of bitcoin and other coins is key to adoption by institutional investors.

    An offering of bitcoin and other cryptos on the more tech company focused Nasdaq exchange would likely be more impactful than a NYSE listing. There are operational differences in how the two exchanges work, as well. Trading on the NYSE involves two parties participating in a live auction style with buying and selling prices determined on the fly by the traders. The Nasdaq on the other hand relies on market makers to provide liquidity. Regardless of the exact method of trading, a bitcoin listing on Nasdaq would likely be a huge boost for the crypto markets.

    Jane Street Capital already offers bitcoin to investors

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    Meanwhile, a private investment company has reportedly been trading bitcoin for some time. Jane Street Capital, a closely guarded high volume investment trading company, revealed to the media that the company “trades over 56,000 products globally across a wide variety of asset classes, including bitcoin.” The company declined to reveal any further details. Jane Street trades over $5 trillion in annual volume and offers sophisticated proprietary software trading algorithms to its traders.

    It isn’t much of a jump to conclude that other private investment firms are also likely offering some forms of virtual currency trading to customers. With the fresh news from NYSE and Nasdaq exchanges, along with Goldman Sachs announcement and the CME/CBOE futures trading, one has to wonder how much longer institutions will be able to stay out of the bitcoin and crypto markets.

    Grayscale crypto funds continue to roll out

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    Grayscale Investments has had its bitcoin investment trust (GBTC) available for OTC purchase since May 2015. Investors interested in purchasing bitcoin but unwilling or unable to do so directly through crypto exchanges can buy shares in GBTC via traditional brokerage houses or even within self-directed IRA’s. Earlier this year, Grayscale rolled out single coin funds for Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), Bitcoin Cash (BCH), zCash (ZEC), and Ripple (XRP). Those funds are open only to accredited investors for the first year before they can be more widely offered. This is set to occur in March 2019. Currently only US investors with a net worth of greater than $1 million or annual income of greater than $200,000 can purchase shares of these funds. Other countries vary in definition of an accredited investor.

    Grayscale has also created a multicurrency index fund, the Digital Large Cap fund, that will hold a basket of the largest cryptocurrencies by market capitalization. It too remains open only for accredited investors at this point. Potential investors should keep in mind that these fund shares can trade at a premium to the underlying assets held, and most of the held coins can be purchased on licensed crypto exchanges with minimal effort. However, these crypto funds can be purchased within a tax-deferred retirement account, which may appeal to many investors.

    What’s next for bitcoin and institutional investors?

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    If regulations are sorted out and storage issues can be addressed, institutions will likely adopt more crypto friendly trading policies, probably much to the chagrin of Jamie Dimon with his proclamation of firings for any employee caught trading bitcoin. He embarrassingly had to recant on that statement when his firm issued a supportive statement on the future of bitcoin. I suspect that many Wall Street institutional investors and mainstreet retail investors will gradually enter the bitcoin market over the course of Q3 and Q4 2018. Many of them will be compelled to do so in order to keep up with the competition already offering cryptocurrency to investors.

    In the meantime, expect crypto exchanges like Coinbase(and GDAX), Poloniex (just purchased by Circle), Bittrex, Gemini, Kraken, Binance and Bitstamp, and many, many others, to continue to streamline their user interfaces and update their apps to onboard customers at quicker pace to stay ahead of the competition. Indeed, Coinbase has added a large number of new empoyees and computing resources in expectation of future growth of the sector. Meanwhile, bitcoin newcomer Robinhood raised over $360 million to expand its cryptocurrency market presence.


    All of this should make for at least an interesting close to 2018 bitcoin prices, to say the least. Be sure to let us know what you think the crypto investing future holds.
     
    Old Man Crypto likes this.
  2. Old Man Crypto

    Old Man Crypto Expert chainblocker

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    On one hand you have legit companies moving in while scam exchanges Ike upbit run away with everyone’s crypto. You’d think the bigger US companies will drive the dipshit hackers and scam exchanges out of business. But then crypto was started to avoid the same banks that will likely rush in and save investors from themselves. Ironic, no?
     
    The CC Forums likes this.
  3. Old Man Crypto

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  4. CryptoTC

    CryptoTC Crypto Fat Cat
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  5. BitFit

    BitFit Ready to fork

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    Thanks for that extra info. Wonder why bitcoin isn’t reacting positively to all the good news. Maybe it just takes more time. I guess patience like you said in another article about investing.
     
  6. BitFit

    BitFit Ready to fork

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    Crickets on my price question? Everybody too stunned by the drop?
     
  7. The CC Forums

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    No one really knows, and I guess most people aren’t willing to predict the next bitcoin market move.

    But I stand by my comment in the article. I think Q3 and Q4 will see bitcoin upward price pressure. Way too much money being pumped into exchange upgrades and new buying options for new investors. Of course, exchanges make money whether the price goes up or down.
     
  8. CryptoTC

    CryptoTC Crypto Fat Cat
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    Another summer run maybe? This market is so manipulated that no one knows what’s going to happen next.

    But bitcoin will likely be higher in 2019 and 2020. Dollar cost average and relax. Don’t invest more than you can lose. Experts often recommend no more than 5-10% of your assets should be in aggressive high risk investments.
     
  9. The CC Forums

    Staff Member

    And Wall Street gets closer to a solution for directly buying crypto with the Sunday BitGo news about offering a custody solution.

    BitGo Courts Wall Street With New Bitcoin Custody Products - CoinDesk

    “Big Wall Street firms now have new options for storing bitcoin.

    Announced Sunday, Palo Alto-based startup BitGo has unveiled a new suite of custodial services aimed at institutional investors who may be eying the market with interest.

    The product launch notably builds on BitGo's move to buy Kingdom Trust, a US qualified custodian of traditional financial assets, in January. But while that acquisition is still awaiting regulatory approval, that isn't stopping BitGo from bolstering its offerings.”
     
  10. BitFit

    BitFit Ready to fork

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    Even more good news today but bitcoin price isn’t moving. I don’t know whether to buy or sell, so I’ll just hodl I guess. Seems like something in the news should be pushing prices up. Frustrating.
     
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  11. The CC Forums

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    Dollar cost average. It’s a good method to use when you want to be invested in something but you don’t think you can predict the short term price moves. But you have to be committed to doing it regularly and for a long-term approach. Dollar cost averaging won’t work if you only do it for a few months.

    Buy the same dollar amount of bitcoin every Monday at noon. Doesn’t look at the price. Just buy it each and every Monday. Or monthly after payday. Just pick a regular date and do it. It’s harder with crypto and bitcoin. Coinbase allows regular scheduled buys, but their fees really make it difficult to commit through them, especially if you’re moving small amounts each week.

    It has to be manual so it takes a commitment. Use GDAX or Gemini. Transfer money into your account at the same time each week or month. Then place a buy order at the same time each week or month. Repeat, repeat, repeat. 18 months later, you probably will have accumulated a decent value in bitcoin.

    Good luck.
     
  12. Old Man Crypto

    Old Man Crypto Expert chainblocker

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    Looks like sideways for a while in my best guess. I think manipulation happening by the big players before more big fish move in. I think they are keeping prices down on purpose.

    But I might be out of my mind also. :confused::eek:
     
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  13. CryptoTC

    CryptoTC Crypto Fat Cat
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    Market taking a big dump right now.

    Let’s see those institutions move in soon please.
     
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  14. The CC Forums

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    Circle is now expanding their crypto offerings. Cross post from another thread in this section.

    Circle to offer basket of cryptos

    Circle announced today that they will be offering a product for retail investors that allows purchase of a basket of cryptocurrencies with one order rather than by individually allocating buys.

    Interested investors can now purchase a basket of 7 coins based on their market weighting even with small amounts of money, as little as $1 according to their press release.

    Dubbed “Buy the Market,” the basket purchase includes Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), Zcash (ZEC) and Monero (XMR)

    Circle made news earlier this year when they acquired crypto exchange Poloniex.
     
  15. The CC Forums

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  16. Old Man Crypto

    Old Man Crypto Expert chainblocker

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    And even harder today.

    I’m going back into grumpy old man crypto mode. Market sucks. Bitcoin is dead. Crypto doesn’t work. Blockchain is doomed.

    Blah blah blah and Bah!
     
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  17. CryptoTC

    CryptoTC Crypto Fat Cat
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    After the denial of their ETF application, the Winklevoss brothers still believe Wall Street will move into crypto markets. They caution it will take time.

    https://www.ccn.com/tyler-winklevoss-it-will-take-time-for-wall-street-to-make-crypto-jump/

    It is taking longer than I expected, for sure. Coinbase Custody should be easily accessible by now. I guess many companies have to change their investment charters to allow for bitcoin. Early movers could be getting some good buys right now.

    CEO of Gemini Tyler Winklevoss said institutional investors were gradually warming up to cryptocurrencies, but it will take time before they make a splash.

    He said:

    “Wall Street is taking cryptocurrencies seriously. However, the vast majority of Wall Street firms are still not participating in the cryptocurrency market, which remains primarily a retail-driven market. This will change over time, but it will take time.”

    Institutional investors have been on the sidelines for a while due to the regulatory uncertainty hanging around cryptocurrencies. Investors on Wall Street are waiting for the regulators to clarify their positions on tokens and allow other financial instruments into the market, such as the Bitcoin ETF proposal drafted by Gemini and Cboe Global Markets Inc. The fund, if approved would have opened up the volatile cryptocurrency market to institutional investors.
     
  18. The CC Forums

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    We’ll be updating this thread with the latest list of institutional announcements. I invite everyone to share any news on major companies moving into the crypto space in this thread. US or global are all of interest.

    Anyone in Europe or Asia able to comment on major traditional finance moving into crypto?
     
  19. The CC Forums

    Staff Member

    News today of rumors that Goldman Sachs is backing off of their plans to offer crypto products. If true, this is a decent sized blow to crypto and bitcoin markets.

    Right now, there are plenty of other companies that appear to have plans in the crypto arena going forward, but we aren’t seeing any concrete evidence of actual products being offered or accounts being available anywhere except futures contracts.

    Crypto needs mainstream players to enter the space for any price appreciation. Barring this, I see prices remaining flat through early 2019.

    Coindesk article here. Goldman Sachs Said to Have Sidelined Plans for Crypto Trading Desk - CoinDesk
     
  20. Bloc10Fintech

    Bloc10Fintech Buys the dips

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    Morgan Stanley is one of the largest US-based banks in the world, and that makes its interest in cryptocurrencies, especially Bitcoin, a point worth noting. It’s such large institutions that really make a huge difference when a product needs general market acceptance. It won’t be different for Bitcoin if this huge bank goes ahead with its latest plan to offer Bitcoin trading facilities to its clients.
     
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