The Stoicism of Bitcoin
Good morning from San Francisco!
Part of your editorial team (Ram) is currently at Blockchain Week in SFO, so Rohit will be mostly pinch hitting solo on the newsletter with support from Divyang.
Please hit us up if you want to grab coffee today/tomorrow in SFO or Wed/Thu around #Hoshocon, the Blockchain security conference in Las Vegas. Excited to hear the man Andreas Antonopoulos himself.
With more than three-quarters of the year now behind us, Bitcoin’s price is showing no signs of a meaningful uptick for the remainder of the year. In terms of positive news for cryptocurrencies, the last two weeks have been probably the best stretch of feel-good cheer in 2018, with TD Ameritrade announcing their investment in a cryptocurrency spot and futures exchange and the news around serious institutional investors (Yale’s endowment fund) finally dipping their toes in to crypto waters
In a year that has had a dearth of positive triggers to induce an upwards price reaction, we are quite surprised by the market’s impassivity to all this good news. This is the opposite of what we saw at the end of last year, when any negative news was discounted by the market in Bitcoin’s manic run up to $20k.
One reason all the good news is not moving the market is likely because of the passive nature of the cryptocurrency exposure that institutional investors are seeking. We would have expected prices to run up more than they did if Swensen of Yale, for instance, had made a direct investment in cryptocurrencies. Institutional investors preferring indirect exposure to cryptocurrencies is seen as indicative of their misgivings with the fundamentals of this asset class and/or the lack of sufficient institutional-grade custodial solutions. As we have opined before, this has been the biggest deterrent for institutional investors with respect to cryptocurrencies.
There has been anecdotal evidence of institutional investors pouring in money into OTC markets, which should offer more price stability to Bitcoin going forward. And the fact that, unlike equities, where heavy buying/selling in OTC markets has an almost instantaneous effect on exchange-traded prices, the siloed and insular nature of crypto OTC markets makes the flow of information and the subsequent price creep/adjustment into exchange-traded prices much harder and slower.