Cryptocurrency markets have received an incredible amount of bullish news over the past few months, yet the price has barely budged. We believe this is adding fuel to the eventual fire that will ignite under cryptocurrency prices. In this article, we cover the latest bullish news and present our case for much higher cryptocurrency prices in the months ahead.
NYSE Operator, ICE, Launches Bakkt Cryptocurrency Services
The Intercontinental Exchange (ICE), which owns and operates the New York Stock Exchange and more than a dozen markets and exchanges worldwide, officially announced its new cryptocurrency business in August. Bakkt’s first product will be a bitcoin futures contract. This contract is different from other bitcoin futures currently on the market because it has real deliverable bitcoin attached to it (by contrast, the CME and CBOE futures are synthetic, meaning there’s no actual bitcoin involved).
The new platform, Bakkt, will allow investors to buy, trade and store cryptocurrency on a federally regulated market. Bakkt will focus on bitcoin initially. And it’s scheduled to launch in November. It will primarily target institutional investors (large financial firms), but there will eventually some retail offerings as well. Bakkt it will also help merchants accept cryptocurrency as payment.
Here’s how Bakkt CEO Kelly Loeffler describes the project:
Our first contracts will be physically delivered Bitcoin futures contracts versus fiat currencies, including USD, GBP and EUR. For example, buying one USD/BTC futures contract will result in daily delivery of one Bitcoin into the customer’s account.
Bakkt is designed to serve as a scalable on-ramp for institutional, merchant and consumer participation in digital assets by promoting greater efficiency, security and utility…
We are collaborating to build an open platform that helps unlock the transformative potential of digital assets across global markets and commerce.
They’ll now have a U.S.-regulated exchange, and they have a licensed warehouse, which is how commodities are stored, and that’s going to make it a lot easier for an ETF to come through. They have influential business partners such as Microsoft and Starbucks. While Bakkt is aiming to be a global network for trading and settling digital assets, its partners suggest that it might be looking to enter the retail sector as well.
Bakkt recently announced that Coinbase employee #5, Adam White, is joining the company as Chief Operating Officer. Considering that Coinbase is one of the most successful companies in the cryptocurrency space, with a reported $8 billion valuation and over 25 million customers, this is a vote of confidence in the future of Bakkt.
The ultimate hope is that Bakkt could potentially facilitate cryptocurrency trading for Wall Street firms in a way that is just as easy as trading traditional stocks, bonds or commodities.
Fidelity Launches Institutional Platform For Bitcoin And Ethereum
Fidelity Investments will launch a new company – Fidelity Digital Assets – that is going to offer cryptocurrency trading services to institutions and hedge funds.
The new brand of Fidelity will provide enterprise-grade custody solutions, a cryptocurrency trading execution platform and institutional advising services 24 hours a day, seven days a week, designed to align with blockchain’s always-on trading cycle.
For those unfamiliar with the firm, Fidelity Investments provides financial services for $7.2 trillion in customer assets and investment services for 13,000 institutional advisory firms and brokers.
With Fidelity Digital Asset’s first customers being onboarded now, and general availability scheduled for early 2019, the launch of the subsidiary with 100 employees marks the latest and perhaps the largest push into cryptocurrency by an institutional asset manager.
“This is a recognition that there is institutional demand for these assets as a class,” says Tom Jessop, founding head of Fidelity Digital Assets. “Family offices, hedge funds, other sophisticated investors, are starting to think seriously about this space.”
TD Ameritrade Backs a New Cryptocurrency Exchange
The U.S. brokerage firm announced a strategic investment in an exchange called ErisX, which offers both bitcoin spot and futures trading. High-speed trading company Virtu Financial will also back the exchange. TD Ameritrade, which has more than $1.2 trillion in assets and 11 million retail accounts, was the first financial services firm to offer approved clients access to those bitcoin futures contracts last year.
“We wanted to find a platform that would be fully regulated, and something that has that capital markets feel,” says JB Mackenzie, head of futures and foreign exchange trading at TD Ameritrade.
Meanwhile, Morgan Stanley, Goldman Sachs and Citigroup are all planning some type of derivatives contracts to give their clients synthetic exposure to Bitcoin. Ideally, they will offer exposure to the actual cryptocurrency that requires buying it in the open markets and a custodial solution. Otherwise, these are just glorified casino offerings. Nonetheless, it helps to demonstrate institutional investor demand for exposure to cryptocurrencies.
Yale, Harvard, Stanford, MIT and Other Ivy League Schools Invest in Crypto
The Yale Investments Office has allegedly backed two Silicon Valley cryptocurrency funds, Paradigm and a16z crypto. Both venture funds were recently established and plan to invest in cryptocurrency assets and digital currencies, according to their websites.
But it is not only Yale. The University’s peer institutions, including Harvard, Stanford and MIT, have also invested their endowments in cryptocurrency funds.
Because of Yale’s impressive investing track record, everybody would like to know what Yale is doing. If Yale is investing in cryptocurrency, then others will invest as well. When Chief Investment Officer David Swensen assumed his position at the helm of the Investment Office in 1985, endowment offices across the country were almost exclusively trading stocks and bonds. But Swensen invested in real estate, private equity and venture capital — an approach to investing endowments now known as the “Yale Model.” Since then, Yale’s endowment has ballooned to almost $30 billion, the second largest of any American university.
“The job of any investor is to explore new opportunities,” Skorina said. “Investing in cryptocurrency funds is an opportunity that Yale’s Investments Office thinks is worth pursuing.”
As Mike Novogratz put it:
“This is really big news. David Swenson the most influential investor in the world. By making this investment he just said the bitcoin is a store of value. He’s the alpha bull of the herd.”
Gemini Exchange Secures Custodial Insurance Marking Industry First
Gemini Trust Company, LLC (Gemini), a leading digital asset exchange and custodian, announced today that the company has secured insurance coverage for custodied digital assets through a global consortium of industry-leading insurers and arranged by Aon, a global professional services firm providing a broad range of risk, retirement and health solutions. Gemini’s digital asset insurance coverage is in addition to the already available FDIC-insured U.S. dollar deposits.
The news comes just weeks after the exchange announced it was launching a dollar-pegged stablecoin approved by the New York Department of Financial Services. Gemini is backing its stablecoin with dollar holdings similarly insured through the FDIC, it said last month.
Gemini head of risk Yusuf Hussain said in a statement that:
“Consumers are looking for the same levels of insured protection they’re used to being afforded by traditional financial institutions. Educating our insurers not only allows us to provide such protections to our customers, but it also sets the expectation for consumer protection across the crypto industry.”
The Cryptocurrency Bull Market is Just Getting Started
The sharp correction in cryptocurrency prices in 2018 has left many investors disillusioned with the space. People that bought near the top have been decimated. The naysayers have been proudly telling everyone how they were right and how Bitcoin is a scam.
While most early adopters and HODLers are still HODLing, mainstream retail and institutional investors have thus far been afraid to get into this emerging volatile sector.
So far, the price of Bitcoin and other cryptocurrencies has not reacted positively to all of this news.
But all of that is about to change.
- Volatility has reached its lowest levels in quite some time, as the price of Bitcoin has been consolidating within a relatively tight range around $6,000. Long consolidations build a strong technical base for the next bull cycle.
- Stocks, bonds and real estate are all overvalued and due for a major correction. As these bubbles pop and deflate, investors will be increasingly seeking non-correlated asset classes in which to park their funds.
- Precious metals and Bitcoin are a few of the only major asset classes not trading near all-time highs and not correlated to traditional financial markets. They both have significant upside to return to prior highs.
- Precious metals and Bitcoin are also limited in supply, so prices are likely to explode higher when a wave of new demand comes rushing into these sectors, while supply remains mostly flat.
- Institutional money will soon be able to start flowing into the cryptocurrency space in a real way, not solely via synthetic futures. Regulatory and custodial solutions are now rolling out with some of the biggest names in the financial space backing cryptocurrency as an investment class. This includes NYSE operator ICE/Bakkt, Fidelity, TD Ameritrade, BlackRock, Goldman Sachs, CBOE, CME and others.
- Some of the most successful investors and some of the best and brightest educational institutions are now investing in cryptocurrency and blockchain-based startups.
Ran Neuner, host of CNBC Trader, has some insightful comments that summarize what has been happening in the cryptocurrency space:
1 year ago we had no infrastructure, no futures, no real way to invest for institutional money.
Today we have; 1. Variety of stable coins pegged to USD. 2. Institutional trading platforms and tools 3. Institutional grade custodians. 4. Insured Custodians. 5. Inevitable ETF soon.
Bakkt, TD Ameritrade, Passport Capital, Yale endowment, Fidelity, BlackRock, NYSE, Goldman’s …. you really think they are investing in the space with $200bn (market cap of all crypto) in mind? They know it’s very temporary and that over a Trillion is coming soon!
Thus, we believe that prices for Bitcoin and other quality cryptocurrencies are going to rocket higher over the next 6 to 12 months. All of this positive news flow is pent up momentum that will eventually lead to a significant re-valuation for the sector. The opportunity to buy Bitcoin below $6,500 or Ethereum near $200 is not likely to last much longer.
We hold Bitcoin, Ethereum and 10 other cryptocurrencies in the GSB model portfolio. Our top pick is up over 80% in the past month and we have a price target of more than 3x the current price for 2019. Get all of our research and top picks across the cryptocurrency, precious metals and cannabis sectors by signing up today.
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