Investors do not like Bear Markets, unless they are professional traders that love nothing better than to short an overbought sector of the market. For institutional investors, however, traders are always on the lookout for the sector that has the most “up” potential, while discarding anything that feels the pull of gravity downwards. During what has been labeled “Crypto Winter”, investors with large portfolios are avoiding cryptos with a passion, or so says Nikolaos Panigirtzoglou, global market strategist for JPMorgan Chase & Co., and his team of analysts in a recent newsletter.
Panigirtzoglou says that:
Participation by financial institutions in Bitcoin trading appears to be fading. Key flow metrics have downshifted dramatically. Crypto trading volumes have plummeted. This suggests that prices have declined to a point where mining is becoming uneconomical for some miners, who have responded by turning their mining rigs off.
Barry Silbert, the founder of crypto investment fund Digital Currency Group, does not agree with this summation. From his perspective, the health of the crypto industry is not something that turns to the whim of miners. The goings ons within mining establishments are totally unrelated to what investors perceive at the investment level. Mr. Silbert elucidates:
You have to separate the investment decision that a miner is making from the operating cost for them to mine the Bitcoin, The mining businesses that have been created over the past five years have accumulated massive amounts of capital. They have the ability to continue mining at a loss [because they’re going long].
Any comments related to cryptocurrencies that emanate from JPMorgan, at best, should be further scrutinized, considering first how negative its senior management is toward the phenomenon. Jamie Dimon, the Chairman and CEO of the firm, has never been shy about sharing his opinions about the crypto world. Bitcoin bashing is one of Jamie’s passions. He is forever calling it a “scam”, then claiming his words were taken out of context. He thinks blockchain technology is definitely a wave of the future, but he also suggests in the background that central bankers should shut cryptocurrencies down.
At public speaking engagements, he has not minced words:
I don’t really give a sh*t [about Bitcoin]. Blockchain is real, it’s technology, but Bitcoin is not the same as a fiat currency.” He is also purported to have said that if he caught anyone in one of his trading rooms engaging in crypto positions, then: “I’d fire them in a second.
For every large investment bank critic of Bitcoin and its brethren, there are several more supporters on the opposite side of the fence. No one is claiming that cryptos will replace fiat currency, a pipedream that even zealots are now dismissing, but Allianz chief economist Mohamed El-Erian has said, “Bitcoin will survive the current market sell-off because it’s here to stay.” Major global consulting firms have also been on board, stating that the future will be bright and that 2019 will be a year of recovery and consolidation, leaving Bitcoin once more at the top of the heap.
Mike Novogratz, a former partner at Goldman Sachs and founder of Galaxy Digital, has this to say to critics of cryptos that choose to pile on when crypto prices are falling: “Revolutions don’t happen overnight.” By the way, Bitcoin and others have recovered 25% in value over the past few days, another sign that they are not fading to zero, as critics have been shouting from the rooftops.