The cryptocurrency market has been undergoing a spirited rally over the course of the latter quarter of this year. With Bitcoin only now retreating down from $11,000 right now, with a market cap of over $185 billion. And even though there are analysts and speculators that operate under the impression that a bearish downturn is in the works, 2019 is a unique year for cryptocurrencies as a whole.
This, of course, is the entrance of institutional investors into the marketplace; rapidly outstripping initial retail interest back during the boom year/s of 2016 and 2017. This institutional interest has actually managed to transcend the world of myth to become clear reality.
This is according both to some of the comments made by Brian Armstrong, the CEO of Coinbase this week, along with some of the reports over this quarter of 2019.
“Whether institutions were going to adopt crypto or not was an open question about 12 months ago. I think it's safe to say we now know the answer. We're seeing $200-400M a week in new crypto deposits come in from institutional customers.”
These comments come hours after the confirmation of the California-based cryptocurrency exchange's successful acquisition of the digital storage solution - Xapo - for a total of $55 million, having successfully outbid Fidelity Digital.
So what does this mean for Coinbase, specifically? For starters, the acquisition of Xapo allows for the exchange to expand the range of services that it provides for users, as Armstrong comments:
“In addition to custody, we’re excited to explore new ways to monetize and leverage crypto assets such as staking, borrowing against crypto portfolios and lending crypto to trusted counterparties."
With Coinbase's new acquisition, Armstrong's statement on institutional investments is no exaggeration. Shortly after this purchase, the investment management company Grayscale Investments announced that it would officially be moving $2.7 billion worth of funds from Xapo to Coinbase.
This month also sees further momentum for providing for this currently moistening appetite; with major investing names like Bakkt having reported to news sources that it had successfully received approval for the launch of its own range of Bitcoin Futures in September 2019.
This interest from the more 'established' money of the world goes far beyond just Coinbase. Fidelity, along with competing directly against Coinbase of Xapo, published some research earlier this year on the subject of the growing appeal of cryptos.
According to Fidelity, out of the institutional investors interviewed during their study, the team found that more than 22 percent of the 400 investors that they interviewed were holding some quantity of cryptocurrencies.
This is corroborated by the fact that further research found that a steadily increasing number of investors are beginning to, not only recommend cryptocurrency/ies to some extent to their clients. But also to actively become holders of no small sum themselves.
Not necessarily, unfortunately. While this abundance of new investors contributes to higher market caps, higher crypto values and more liquidity. Analysts are still arguing that the entire space remains under-developed and, as a result, still a risky playground to start running around, even for investors in futures contracts.
Professor of finance at the University of Villenova, John Sedunov argues that the current financial climate lends itself to a booming cryptocurrency market. We can see this with the worsening performance of international indices such as the NASDAQ, FTSE, S&P 500 among others, as well as the ongoing international trade disputes between China and the United States.
“There’s uncertainty in where we’re heading, and that makes cryptocurrency more attractive,” even so: Professor Sudunov urges caution to those hawkish types looking to dig heavily into the market.
“There’s going to be growth spurts, setbacks, all these things that come with figuring things out," Sedunov continues.“It’s a somewhat fragile ecosystem right now.”
For longer term investors, Sedunov's comments, and the current landscape of the investment world make for rather compelling arguments for why you should buy now.