In this Crypto Weekly, we dive into two main areas of focus. The first being the Bitwise Cryptocurrency ETF and a discussion on how ETF’s will change the cryptocurrency landscape. The second focus area is an opinion piece on Bitcoin’s future price, as well as my opinions on the market’s appreciation.
But first, a look at the markets weekly performance.
Cryptocurrency Market 7-day recap
This past week has seen a sharp increase in the cryptocurrency market valuation. This is likely due to news around new Bitcoin ETF applications, including the Bitwise Cryptocurrency ETF , being filed with the S.E.C. in the United States.
The week started around $286 billion and finished at around $301 billion. This represents an increase of around $15 billion, or around 5%.
Trading volumes were up but have since dropped. The week started around $18.8 billion, finishing lower at $15.8 billion. This is a reduction of around 16%.
Figure – Coin market cap
Bitcoin dominance has picked up again this week, starting out at 43.2% and finishing at 43.90%. Since this time last week, that is an increase of 2.2%.
Figure – Coin market cap
Google trends searches for Bitcoin, Ethereum, Ripple and cryptocurrency are not showing anything out of the ordinary. Typically, searches for Bitcoin are up towards the end of the week on the back of the ETF news.
Figure – Google trends
Bitwise Cryptocurrency ETF on the horizon
Cointelegraph reports that digital asset manager Bitwise has filed with the US Securities Exchange Commission (SEC) to launch a regulated exchange-traded fund (ETF) for cryptocurrency. Bitwise is the only entity to apply for an ETF that would track multiple digital assets. This is great news for people who want to buy an asset, such as gold, without actually taking possession of it. Third parties will take a small cut for acting as custodians. The ETF will track assets and allow them to be traded like stocks on an exchange.
The Bitwise HOLD 10 Cryptocurrency Index will include 10 cryptocurrencies. Cointelegraph explains it will track the Bitwise HOLD 10 Private Index Fund that was founded in November. The HOLD 10 Index captures around 80 percent of total market capitalization of the cryptocurrency market.
Additional Press on Bitwise:
Matt Hougan, the Bitwise global head of research told CNBC:
“We’re joining the queue. The market is professionalizing in a direction that the SEC would allow a crypto ETF onto the market.”
Cointelegraph reports that the SEC postponed its review of a Bitcoin ETF application by investment firm Direxion.
Lawyer Jake Chervinskt brought the realities of ETF timescales into focus. He tweeted:
0/ It kills me to tweet about SEC rulemaking procedures, but given the confusion on #crypto twitter today, it feels necessary.
TL;DR — the SEC can, and probably will, delay its decision on the VanEck/SolidX commodity-backed #bitcoin ETF until ~February 21, 2019.
— Jake Chervinsky (@jchervinsky) July 24, 2018
He added: “Unlike other types of funds (like mutual funds, closed-end funds, etc.), the federal securities laws did not originally provide for ETFs. As a result, ETFs have to obtain an individualized exemptive order from the SEC before going to market. The timing of the ETF approval process follows a standard formula: – the ETF files a ‘proposed rule change’ with the SEC; – the SEC posts notice of the filing in the Federal Register and solicits comments; and – the SEC has 45 days from posting to approve or deny the ETF.”
Here’s why a bitcoin ETF matters: With the release of an ETF, this allows investors to add bitcoin to their retirement portfolio. Global Pensions Market: $41.3T If bitcoin captures just 1% of global pensions, that would create $413,000,000,000 of exposure for cryptocurrencies. — Nicholas Merten (@Nicholas_Merten) July 24, 2018
The next Bitcoin bull run
Bitcoins price hinges on supply and demand. During the past 12 months, the ecosystem has begun to transition from retail investors buying Bitcoin, to institutions. This change in market participants also changes the market’s behaviour and psychology, meaning that as more institutions become involved, there is a lower probability of volatility induced selling.
The effect that this more mature holding can have on a market is significant. The Bitcoin volatility index, which shows Bitcoin’s volatility is reducing over time, is a useful metric we can use to measure this.
As we can see, Bitcoins volatility has significantly reduced since 2011. A small spike occurred over late 2017 and into 2018, but it is my belief that as the market matures, the volatility will continue to reduce.
Over the Counter (OTC)
The next reason why I am bullish is in relation to OTC, or over-the-counter buys, where high net worth individuals or institutions can buy large quantities amounts of bitcoin, but off the order books.
What this means is that instead of logging into an exchange and placing an order for say 1,000 bitcoins, the order is transacted privately. Not only can special rates be negotiated, but the transaction itself is not made public. This stops the market from moving when the buy order is seen, and also prevents slippage as pegged prices can be negotiated between buyer and seller.
Now the word the street is OTC buys are the highest they have ever been. Huge transactions are being made, but no one can see them. Institutions and high net worth individuals are accumulating bitcoin, knowing full well its ever-expanding network effects and programmed supply schedule are incredibly favourable.
Further, there is far greater liquidity in the market now. There are hundreds of thousands, if not millions of new market participants, exchanges, OTC fiat on ramps, and custodian services such as Coinbase custody. These all provide far greater support to people wanting to buy and hold cryptocurrency, effectively enabling the market to ‘scale’, when the price starts to go up.
Lastly, as we mentioned at the beginning of this article, there are Bitcoin ETF’s in the wings. For years now, we have had many applications filed, with no success. Issues such as custody, regulation, and sentiment had to improve before the S.E.C was ever likely to approve one.
Times have changed since then, and I think the approval of an ETF is just around the corner. Once this approval comes, it can not be understated as to the effect it will have on the market in the years to come.
|Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators’ websites before making any decision. Cryptocurrency Australia Media, or the author, may have holdings in the cryptocurrencies discussed. Referrals and affiliate links do earn us commissions but they are products or services we personally use and would not endorse if we did not believe in them|
Beau is the Founder & Chief Editor at Cryptocurrency Australia Media, an educational platform designed to help anyone learn about cryptocurrency investment and blockchain technology. Beau is also the Founder & Principal Consultant of Blockchain Management Solutions, a specialist technical and project management consultancy, is an advisor with Masternode Ventures, a blockchain incubator, and is an advisor with THORChain, a new decentralized exchange protocol.