Cryptocurrency Investors Underestimate Bullish News

Jason Hamlin  |

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.

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.

ICE Bakkt Cryptocurrency Bitcoin

Here’s how Bakkt CEO Kelly Loeffler describes the project:

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.

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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.

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.

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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.

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.

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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.

As Mike Novogratz put it:

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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:

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.

Ran Neuner, host of CNBC Trader, has some insightful comments that summarize what has been happening in the cryptocurrency space:

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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