Bitcoin revisited the upper $7,000s this weekend, continuing its ranging behavior, but always with a gradual downward slope, as if tempting bears or bulls to grab on. The excitement from a few weeks back is quickly becoming a distant memory, but so is $10,000, its last ranging median for weeks on end. Advocates, however, are emboldened by the fact that their favorite digital asset did not dip below $7,000. Their new pastime has now shifted from dour thoughts of what might come to rosy pictures of what 2020 and beyond might be.
Yes, Bitcoin’s loyal fan base is forever hopeful that next year’s halving event will bring a surge in forward momentum, hopefully driven by a wave of institutional support that continues to lay back in the weeds, cautiously biding its time while it decides how to use this alternative asset in its respective portfolios. Bakkt is now up and running, though it has and will be decidedly slow off the mark. If you believe the party line, then its target customer is one that takes its time, while the necessary infrastructure for easy access is put together outside the control of the Bakkt exchange. Better days are ahead.
Analysts have been searching for measures of institutional demand, choosing not to rely upon anecdotal storylines that crypto exchanges have pushed forward. The following chart has been making the rounds of late:
Grayscale’s Bitcoin Trust sells participations at a premium to “accredited” investors, i.e., typically the institutional crowd. The “premium” over spot fluctuates with demand, such that low values indicate weakness, while high values reflect higher sentiment. As the chart depicts, the premium is at a low point, as low as back in April before Bitcoin took off for the races. Institutional interest is obviously waning, but is it about to change?
While the Bitcoin faithful awaits the judgment of the market, the bears and bulls continue to wrestle about, now about $8,000 with occasional dips below that support level. At times like these, the faithful can ponder such facts as what kind of returns have passed muster for the first three months in 2019? If you were a Gold Bug, you would be smiling with your “better-than-average” 17% return. Stocks were better on the indexed fronts. The S&P 500 was up 21%, while Tech stocks recorded a blistering 31%. How did BTC fare? Even after recent losses, Bitcoin more than doubled, a return of 110% YTD.
Brad Keoun at Coindesk summed up the changing mood as follows:
On Wall Street, one of the chief criticisms of bitcoin is that it was invented only a decade ago (a baby by old-world standards) by a computer programmer (or programmers, nobody really knows), with no real fundamental, underlying value. It’s just a made-up thing, as they say, with a volatile price that only derives from what the next buyer is willing to pay.
Keoun then added:
But with the global economy slowing and trillions of dollars of government bonds from Europe and Japan trading with negative yields, bitcoin’s price gains this year could conceivably attract a new wave of investors who previously wouldn’t even take a look.
In other words, with the global economy slowing, portfolio managers have to consider other alternatives to maintain their return track records, which only means it is a matter of time before BTC appears on their respective screens.
Pantera Capital, one of the earliest cryptocurrency funds, is fielding more calls than normal from institutional buyers, who attended a recently scheduled client conference in San Francisco. Paul Brodsky, a partner at Pantera, noted:
There’s a lot of drama around it all, there’s a lot of energy, there’s a lot of press. We’re getting interest from significant institutional investors of all types.
The fear of a regulatory clampdown may be the largest concern at present. Any progress in this arena would bolster institutional confidence, but patience is the word for now.