The top 3 reasons Cryptocurrency is here to stay
Over the past month, the cryptocurrency market has reached new lows. The recent sell-off has caused fear and indecision in the overall cryptocurrency market. You may find yourself wondering if “this is it” for Bitcoin, Ethereum, and other altcoins. However, I believe there are some very important indicators being ignored. Not the usual ones being pointed to such as the favored “the market has retraced this much in the past”. Although the past is a great place to look, there are other more tangible factors at work that can be observed, pointed to, and if thought about using deductive logic, then a much different picture begins coming into focus. Strap on those tin hats and get ready to connect the qualitative dots!
1) Bakkt - Plans to launch 01/24/2019
What is Bakkt?
Bakkt is a regulated cryptocurrency exchange however, they are different than your average run of the mill cryptocurrency exchange. Why? Because the exchange has been commissioned by the Intercontinental Exchange also known as (ICE), which is the same organization that owns and operates the well-known New York Stock Exchange (NYSE) – the worlds largest stock exchange by volume. In addition, the exchange is also backed by Microsoft and Starbucks.
Physically backed. Bitcoin Stacked?
Another important factor in the futures markets that Bakkt has plans to launch is that their futures contracts will be physically backed. But why is that important? Didn’t Bitcoin futures launch last year? The Bitcoin futures launched by the CBOE last year are not physically-backed. This tiny detail is very often overlooked and tossed aside.
Physically backed is more than just “an amusing term” it has meaning beyond a simple abstraction which plays a very important part in why this is such an integral variable. A non-physically backed future such as the futures contracts offered by the CBOE are settled in cash. That means people buying the contracts buy a contract to speculate on the price movement, and when that contract expires, it does so in cash. That means no one actually buys any Bitcoin by using these futures. The same amount of Bitcoin is always on the market with non-physically backed futures. This does nothing to affect the price, and these contracts have no effect on the underlying supply and demand.
However, these physically backed futures are exactly what they sound like – physically backed in Bitcoin. Therefore all of the contracts purchased on the Bakkt exchange must settle in Bitcoin. This affects the fundamental supply and demand because actual Bitcoin will be removed from the market.
An easier to understand example is the cookie jar example:
Non physically backed
Everyone in a room guesses how many cookies are in a cookie jar. Each cookie in the jar costs $2. After the cookies are counted, there are no people who actually bought any of the cookies. Each cookie is still worth $2.
Everyone in that same rooms makes guesses on how many cookies are in a jar. Each cookie is worth $2. However, the cookies that are counted after everyone buys their “cookie contract” must be purchased. Let’s say there are 25 cookies after, and 4 people had to buy 5 cookies each. Each person bought their cookies at $2, but there are 10 people. The remaining 6 people now want those 5 cookies and they are willing to pay more than $2 per cookie.
Who’s behind Bakkt?
In January 2000, Jeffrey Sprecher was in New York after calling Wall Street for weeks. He was desperately seeking for someone to fund his small company back in Atlanta. That’s when he was approached by Goldman Sachs which set him off on one of the most lucrative futures in finance. Originally, the first exchange he bought was for $1, which he turned into a global trading and data empire currently worth ~44$ billion. In 25 years, he has gone from nothing to one of the most powerful exchange entrepreneurs in the world, and in 2013, his company ICE purchased the New York Stock Exchange.
Kelly Loeffler, the CEO of the Bakkt exchange is also the wife of Jeffrey Sprecher. Earlier this year, in March, Kelly announced she would be resigning from her position in communications at ICE. At that time, the reasons for her resignation were not given in detail by ICE (We know why that is now). In her departure, she was praised as “a senior executive who helped win over Wall Street as the company emerged from roots as an energy trading platform into a pillar of finance.”
“Kelly has a Wall Street fiddle and she’s the Pied Piper.”
Her time at ICE was spent working with Wall Street to convincingly win the big dogs over to their exchange platform. Because she’s had direct experience working with Wall Street in the past, she will have built up a social network to reach out and connect with, and that’s a very important thing to have when you are trying to jump-start a new exchange platform. (Oh, and did I mention, she’s already done this before?)
2) Fidelity Investments
Who is Fidelity?
Fidelity is the 4th largest asset manager with $2.5 trillion in assets under management and $5 trillion in assets under administration, which totals roughly $7.2 billion. Established over 72 years ago in 1946, Fidelity is one of the most trusted financial institutions in America.
In October 2018, the company announced a new and separate company named Fidelity Digital Asset Services. The main focus of the company will be handling custodianship which will allow the buying and selling of Cryptocurrency on behalf of hedge funds, family offices, and other financial institutions. With the issue of custodianship solved by such a well-known institution, the proverbial floodgates will open to a whole new client base – institutional investors.
In a recent Fidelity Global Institutional Investor survey, there was an overwhelming amount of respondents who said they believe Cryptocurrency will continue to emerge as a new asset class over time as the underlying technology progresses.
NASDAQ is an American stock exchange. Today, it is the second largest exchange in the world by market capitalization, which totals $10 trillion. Nasdaq was launched 47 years ago in 1971. In addition, the NASDAQ was the very first electronic stock exchange in history.
Earlier this year, in April, the CEO of Nasdaq, Adena Friedman said Nasdaq would “consider” becoming a cryptocurrency exchange. At that time, they also partnered with the popular Gemini exchange founded by the Winklevoss twins with the purpose of granting access to their market surveillance technology known as SMARTS.
Three months later, in July, A Bloomberg report was published which stated that a “closed-door” meeting took place between Nasdaq and close to a dozen crypto companies. During that time, they discussed the future of cryptocurrency, but most importantly, the focus of the meeting was to “encourage the industry to do things that will improve the image of Cryptocurrency and validate its potential role in global markets”.
The most recent development was in August when rumors surfaced in regards to NASDAQ launching a platform to trade STO’s (security token offering) as well as having plans to list many of the more notable cryptocurrencies including Bitcoin, Ethereum, and plans to do so as early as Q2 of 2019. However, the platform has not been officially confirmed….yet.
It’s clear the underlying fundamentals of cryptocurrency are moving in the opposite direction of the market prices. However, the closer you look and pay attention to what is being DONE as opposed to what is being SAID, you can begin to see a clear picture that hasn’t been distorted by noise. Currently, the total amount of assets between these 3 entities alone is roughly $38 trillion, which is massive in comparison to the overall global market capitalization of cryptocurrency. Lately, the global market capitalization for cryptocurrency has been fluctuating between $105 – $120 billion, and its all-time high was $900 billion.
Why would all of these financial titans be preparing to launch cryptocurrency services, products, and platforms if there was no future here?
Would they be making actionable investments if they hadn’t undertaken incredibly expensive research initiatives to discover whether or not this market was viable?
The actions being taken here are all actionable developments. As in, they are underway right now and steps are being taken to lay the groundwork for these operations. Now, I suggest you think about the news at the end of 2017 when headlines were saying crypto exchanges in China were dead and there was news of a ban every other week.
Furthermore, the CEO of J.P Morgan, Jamie Dimon was quoted as saying “it is not a real thing, eventually it will be closed”
Although less than 6 months later he folded on that position and apologized for making statements.
Despite all of these very negative headlines at the end of 2017, the price continued to irrationally move up. Here we are now in the last few months of 2018, and all of the news this year has really been quite positive in many aspects of development, growth, recognition, and adoption. Yet, we see the price continue to move in a downward fashion.
In a market famous for its cliff-hanging retracements, and exuberant rallies, you should ask yourself if we’re on the edge of another rally. Remember, the last time Bitcoin went from $2,000 – $20,000, it took a matter of 2 weeks. Don’t let your emotions cloud your rationality and perspective!