No asset class has evoked shock and awe across financial markets this year in the way that cryptocurrencies have.
The relatively nascent market pushed the boundaries of what investors had thought was possible. From the record $69 million sale of a non-fungible token to the explosive gains of memecoins, investors have had to quickly smarten up on the space.
To help you get even smarter and distinguish the real opportunities from the noise, Business Insider will host ‘What’s next for crypto?” a webinar on Thursday, July 15 at 2 p.m. ET. Join Insider’s senior investing reporter Vicky Huang, and senior investing editor Akin Oyedele, in conversation with Yassine Elmandjra, the blockchain and cryptoasset analyst at Ark Invest; David Grider, the head of digital assets research at Fundstrat; and Ria Bhutoria, the principal at Castle Island Ventures.
The panel of these three experts will discuss topics including:
Investing ideas, opportunities, and use cases in crypto broadly and in specific tokens or coins.
Whether the bull market in bitcoin is over for this cycle, and what may happen next following the largest crypto’s plunge from its all-time highs.
The prospects for wider and deeper adoption of crypto by institutional asset managers.
Price targets for bitcoin, ether, and other major cryptocurrencies, including breakdowns of the theses that back them up.
And, the debate around bitcoin’s environmental impact.
The webinar will touch on other major developments in the volatile and evolving space.
The recent decline in bitcoin may take time to recover as institutions fail to step in and buy the dip, according to a Wednesday note from JPMorgan.
The bank sees the fair value of bitcoin over the medium-term at $23,000-$35,000, based on the current volatility ratio of bitcoin to gold. Previously, JPMorgan outlined how bitcoin could hit $140,000 if it matches the allocation and volatility profile of gold.
But on Wednesday, the bank said, “full convergence or equalization of volatilities or allocations [between gold and bitcoin] is unlikely in the foreseeable future.”
“The crackdown on mining operations in China should be considered as positive for bitcoin over the medium-term as it accelerates a shift away from China’s high share in bitcoin’s hash rate, reducing concentration,” JPMorgan said.
The bank views bitcoin’s recent decline more of a continuation of weak flows and price dynamics, rather than pinning it on China’s mining crackdown. And the weak flows suggest institutions are not stepping in to buy the dip in bitcoin at current levels.
“More than a month after the May 19 crypto crash, bitcoin funds continue to bleed, even as inflows into physical gold ETFs stopped. This suggests that institutional investors, who tend to invest via regulated vehicles such as publicly listed bitcoin funds or CME bitcoin futures, still exhibit little appetite to buy the bitcoin dip,” the note said.
Finally, JPMorgan sees one big headwind remaining for bitcoin: the expected selling of the Grayscale Bitcoin Trust following the end of a six-month lock-up period. The bank noted that nearly $4 billion flowed into the trust fund in December and January and is subject to the six-month lock-up period. That period ends in June and July, and investors will likely sell at least some of the trust fund given the recent volatility.
“Despite this week’s correction we are reluctant to abandon our negative outlook for bitcoin and crypto markets more generally. Despite some improvement, our signals remain overall bearish,” JPMorgan concluded.
Bitcoin may have to slide below $30,000 before institutional buyers are lured back into the market and start pushing the price up again, according to a crypto expert at JPMorgan.
One of the key reasons for the recent tumble in bitcoin’s price has been a sharp decline in interest from big players, Nikolaos Panigirtzoglou, a managing director and global market strategist at JPMorgan, told Insider.
Panigirtzoglou said major buyers were drawn towards bitcoin as the price started shooting up in 2021. But he said the soaring cost then began to put them off.
“If you ask, right now, institutional investors whether $50,000 or $60,000 is looking like an attractive level for bitcoin, they will most likely say no,” Panigirtzoglou said.
“I fear we might need to see bitcoin moving below $30,000 for that institutional interest to pick up considerably.”
Panigirtzoglou’s view differs from some strategists, who think a drop below $30,000 would likely spell further trouble for bitcoin. Edward Moya, senior market analyst at currency firm Oanda, said on Tuesday that “a break of $30,000 could see a tremendous amount of momentum selling.”
Bitcoin traded at around $37,500 on Friday. That was more than 40% off April’s record high of close to $65,000, but it was around 25% higher than at the start of the year.
Despite bitcoin’s rally in recent days, Panigirtzoglou said he saw little sign that institutions were moving back in. “If I look at these bitcoin fund flows, there is no evidence here of a buying-the-dip mentality,” he said.
He pointed to the futures market, where prices for bitcoin futures have been trading lower than the spot price. Panigirtzoglou said this suggested demand from major institutions – who often use bitcoin futures to gain exposure – was weak.
Bitcoin soared in the first few months of 2021, and was at one point up more than 120% for the year, spurred on by companies such as Tesla adopting the cryptocurrency.
Yet the price began to crater in May after Tesla boss Elon Musk said the electric car company would no longer accept bitcoin as payment due to its “insane” energy use. A fresh crackdown by Chinese authorities also soured the mood.
However, Panigirtzoglou said there were signs as early as March and April that institutional interest was waning, particularly in a sharp slowdown of flows into bitcoin products such as Canada’s exchange-traded funds.
Panigirtzoglou, who edits JPMorgan’s weekly flows and liquidity note, which regularly looks at bitcoin, said the lesson from 2018’s price crash was that the current phase of lower prices could last months.
He said one important metric of whether institutional demand was picking up again would be rising futures prices relative to the spot price. Another positive signal would be if the share of bitcoin in the cryptocurrency market began to grow again, after shrinking in recent months.
JPMorgan sees worrying signs in the bitcoin futures market.
The bank’s strategists, led by Nikolaos Panigirtzoglou, said the fact that bitcoin futures have been trading at a discount to the spot price – technically known as backwardation – is a sign of weak demand from big players.
“We believe that the return to backwardation in recent weeks has been a negative signal pointing to a bear market,” the strategists said in a note on Wednesday.
“This is an unusual development and a reflection of how weak bitcoin demand is at the moment from institutional investors that tend to use regulated CME futures contracts to gain exposure to bitcoin.” Futures are contracts that oblige the buyer to purchase an asset at a set price at a fixed date in the future.
Bitcoin has rebounded over the last two days and was up around 4% to $37,915 on Thursday. But it was nonetheless still 40% lower than April’s record high of close to $65,000.
JPMorgan’s strategists said their outlook for bitcoin was negative. They said another worrying signal was that bitcoin’s share of the total crypto market fell sharply during April and May from around 60% towards 40%.
Bitcoin’s lower market share is “a bearish signal carrying some echoes of the retail-investor-driven froth of December 2017,” they said. Amateur investors moved heavily into alternative coins as the crypto world boomed in 2017, but quickly withdrew from the market as it dropped sharply over 2018.
JPMorgan said the bitcoin futures curve was also in backwardation for most of 2018, when the cryptocurrency slid from around $15,000 at the end of 2017 to below $4,000 by the end of the next year.
Regulatory pressures are also building. On Thursday, the top global banking regulator recommended strict new rules for financial institutions holding bitcoin.
Despite the quick succession of blows, two crypto professionals argue that the worst is over for bitcoin for now, despite renewed selling pressure.
“We believe that most of the leverage is out of the system now and bitcoin should start to form a base here,” Pankaj Balani, CEO at Delta Exchange, a crypto derivatives exchange, told Insider.
Balani did acknowledge that bitcoin’s recent travails have eroded investor confidence, meaning it will take time for the cryptocurrency to gain sustained upward momentum.
He also added that bitcoin’s price action until the end of May will be critical, although he does think the asset’s price has already bottomed out. Balani did note the $36,000 level as a support threshold, adding that a conclusive breach would signal a longer-term pullback.
To David Jones – chief market strategist at Capital.com, a crypto trading platform – corrections like this are normal. He cites bitcoin’s cult-like following as a reason why the cryptocurrency won’t stay downtrodden for long.
“So has the bitcoin bubble burst?” he said. “Don’t bet on it. Its devoted band of followers means that the crypto-grandaddy has a phoenix-like superpower to rise again.”
Further, in a video published on May 19, billionaire Mike Novogratz said bitcoin will consolidate for weeks, if not a couple of months – although he didn’t give a price range.
“We’re not going to put Humpty Dumpty back together again in a week,” said Novogratz. “But I want to stress loud and clear that the underlying progress that’s happening in both the bitcoin ecosystem … is full speed ahead.”
Billionaire crypto investor Mike Novogratz has predicted bitcoin will be stuck somewhere between $40,000 and $50,000 for four to six weeks after Elon Musk halted Tesla payments in the token and criticized its energy use.
Novogratz called a $40,000 to $50,000 bitcoin price range fair and said: “I think we are going to consolidate for a while, four to six weeks.” He added bitcoin may be stuck between $40,000 and $55,000 for the “next chapter” before ending the year much higher.
The former hedge fund executive said his crypto investment firm Galaxy Digital was buying bitcoin because it thinks it shouldn’t dip below $42,000, the level that was tested on Monday.
Bitcoin was up around 1% to $45,097 on Tuesday. But it’s still down 30% from the record high of near $65,000 hit in April, after a hint from Musk that Tesla may sell its bitcoin holdings caused a further sharp fall on Monday. Musk later clarified Tesla had not sold any bitcoin, which it bought for $1.5 billion in January.
Although Musk’s actions have angered many figures in the bitcoin community, Novogratz said the Tesla boss’s concerns should be taken at face value.
“We use electricity for things that we think provide a tremendous amount of value. And so I think you’re going to see a response from this industry, like you should see a response from every industry, to say… we should do something to offset our footprints,” he said.
Novogratz said the traditional financial world was become increasingly excited about ether, the token on the Ethereum network.
“ETH is certainly having a moment, and it’s having a moment for good reason,” he told Bloomberg TV.
“Right now, it’s got the triple whammy. It’s got payment coins, i.e. stablecoins, being built on top of it. It’s got DeFi [decentralized finance] being built on top of it, and it has NFTs [non-fungible tokens] being built on top of it. So the three major thrusts of the crypto revolution are being built on top of Ethereum.”
Yet Novogratz would not say whether he thought ether could climb higher, after having risen by around 370% year-to-date to $3,500 on Tuesday. He said it would be “healthy” if ether consolidated where it was.
Bitcoin’s weakening momentum has helped contribute to a swift 24% decline from its record high of nearly $65,000 over the past week, and more downside could be ahead if key technical levels fail to hold as support.
The first sign of trouble for bitcoin was a consecutive daily close below its 50-day moving average on Wednesday, which technical analyst Katie Stockton of Fairlead Strategies said was a key line in the sand for the cryptocurrency.
Moving averages are a lagging trend-following indicator that technical analysts use to smooth out price movements and help identify the direction of the trend in place.
Traders often view the the 50-day moving average, which is the average daily closing price of a security over its previous 50 trading sessions, as a short-term moving average that often represents areas of support or resistance.
The 100-day moving average currently sits at $49,500. Bitcoin briefly fell below that level on Friday to $47,500, but has since recovered and is trading at $49,560. Consecutive daily closes below the 100-day moving average would set bitcoin up for more weakness ahead, and with bitcoin’s RSI still above 30, it has yet to reach levels considered oversold by traders.
According to Stockton, the current weakness could lead to bitcoin finding support at $42,000, which would represent an additional decline of 15% from current levels and a total drawdown of 35% from its record high.
“The pullback does not negate the breakout, but it suggests that its targeted level [$69,000] may take longer to achieve,” Stockton said, adding that despite the short-term pullback, bitcoin’s long-term momentum “remains strong.”
A decline in momentum could set bitcoin up for weakness going forward, according to a Tuesday note from JPMorgan.
Over the past few days, bitcoin futures contracts have faced a steep liquidation, which in the past has occurred near big round price levels. Certain thresholds like $20,000 in November, $30,000 in mid-January, and $50,000 in mid-February were all met with a brief decay in momentum.
According to the bank, it’s likely that momentum traders are behind the buildup and decline of long bitcoin futures in recent week.
“Each previous episode presented a challenge for bitcoin momentum to break out above the certain price thresholds,” JPMorgan said.
Now, that price threshold is the $60,000 level. If bitcoin fails to break out above the $60,000 level, momentum signals “will naturally decay from here for several months, given their still elevated level,” JPMorgan said.
JPMorgan is doubtful that bitcoin will be able to break above the key $60,000 level amid a decline in momentum for two reasons.
“First, the decay in our bitcoin momentum signals seems more advanced, reminiscent of the second half of 2019, and thus more difficult to reverse than in the previous three episodes. Second, the flow into bitcoin funds appears weak, raising concerns about the strength of the overall bitcoin flow picture at the moment,” JPMorgan concluded.
Bitcoin’s path to $100,000 per coin is less important than its potential impact on the corporate world over the next decade, according to Wedbush.
In a note to clients on Thursday, Wedbush’s Dan Ives said that the story around bitcoin is much larger than its “potential path/timeline to $100,000.”
The analyst argued the important theme when it comes to cryptocurrencies is “the potential ramifications that crypto, blockchain, and Bitcoin could have across the technology and corporate world for the next decade.”
Ives said moves into blockchain technology and cryptocurrencies could surge over the coming years after companies like Tesla, IBM, Visa, Square, Mastercard, and more entered the fray recently.
There’s a “growing shift for companies to accept this digital currency as a form of payment,” according to the analyst.
Ives added that he still believes “less than 5% of public companies” will invest in bitcoin over the next 12-18 months but said that number could move “markedly higher” as more regulation and acceptance of the currency takes hold.
“Bitcoin mania is not a fad in our opinion, but rather the start of a new age on the digital currency front,” Ives wrote.
Although Ives was one of the first to the party, his comments about cryptocurrencies and their regulation are becoming more in sync with other Street commentators and even CEOs as cryptocurrencies and blockchain technologies continue to develop.
David Solomon, the CEO of Goldman Sachs, said his bank is looking into ways to support clients’ desire to own cryptocurrencies and other digital assets in a CNBC “Squawk Box” interview on Tuesday.
The CEO added that he believes there will be a “big evolution” in the way the US government regulates digital assets in the coming years.
Ives and his team also highlighted the potential of using blockchain technology for decentralized storage in their note to clients on Thursday.
The analyst said blockchain technology can help increase the overall speed and lower the price of digital storage moving forward. He noted, “there are a number of business models attacking this new market opportunity with privately-held Filecoin one of the more impressive strategies we have seen in the market.”
As far as Wedbush is concerned, Bitcoin isn’t going away anytime soon, rather it’s set to become “mainstream” and the effects on Wall Street and the corporate world will be huge.
Coinbase’s 840% revenue jump in the first quarter may be the perfect example of what Ives is talking about.
Coinbase posted $1.8 billion in revenue in its first-quarter report. That means the crypto exchange pulled in over $120 million more than Intercontinental Exchange, the company that owns the New York Stock Exchange, did in its most recent earnings report.
Canada’s financial regulator approved the first publicly traded bitcoin ETF in North America, according to records published Thursday.
The Purpose Bitcoin ETF will seek to replicate the performance of the price of bitcoin, minus the ETF’s fees and expenses, according to a fact sheet posted by Canada-based asset manager Purpose Investments. It will trade on the Toronto stock exchange under the ticket “BTCC.”
“The Fund has been created to buy and hold substantially all of its assets in long-term holdings of Bitcoin and seeks to provide holders of ETF Units (“Unitholders”) with the opportunity for long-term capital appreciation,” the company prospectus reads.
Cidel Trust Company will be the custodian of the ETF while Tyler and Cameron Winklevoss’ Gemini Trust Company will be the sub-custodian. Ernst and Young will be the auditor of the ETF.
The ETF announcement raises hopes that the US Securities and Exchange commission could be one step closer to approving a US bitcoin ETF. Several firms have filed and failed to gain approval for a bitcoin ETF in the past, with the SEC typically citing security concerns.
“It’s another step towards an ETF being authorized in the US,” Sui Chung, CEO of CF Benchmarks told Insider.
While the Canadian bitcoin ETF is a “significant” move forward that demonstrates how regulators in North America have gotten more familiar with the crypto landscape, it’s unclear how quickly the US will follow suit, especially given the differences between Canadian and US financial regulations, Chung added.
Despite pushback from the SEC, demand for bitcoin-based investments has soared during bitcoin’s 2021 rally. The Grayscale Bitcoin Trust that follows bitcoin has gained 272% in the last twelve months. It’s similar to an ETF but it’s physically backed by bitcoin.