It has been suggested that in terms of bitcoin and cryptocurrency adoption we are at the same point in time as the internet was in 1998. If this is true, that could mean we have just witnessed the bitcoin equivalent of the dotcom bubble within the first two quarters of 2018.
Furthermore, if the bitcoin equivalent of the dotcom bubble just hit us, now may be the best time to invest in cryptocurrencies. Don’t believe me? Take a look at 10 of the biggest winners that survived the Dot-Com bubble, you might recognize some of these names:
- Adobe Systems
Follow the institutional money
In traditional stock markets, one of the best ways to find stocks on the move is to screen for stocks with increasing volume. This is because increased volume shows investor interest. As more investors buy the stock, the stock’s price should go higher.
However, with cryptocurrencies, this works a little differently. First of all, the individual investor, while important to the market, doesn’t really have the firepower to affect volume the way that big institutional investors do. Secondly, cryptocurrency markets are so unpredictable and move so quickly that by the time you notice volume changes, it may be too late.
Therefore, in order to screen for cryptocurrencies on the move, you need to predict where institutions are ‘’planning’ to go because very few things can affect prices more than institutional buying.
Financial institutions know how to make money, so when institutions and high net-worth individuals tell you to buy something, you can almost be guaranteed that they’ve already filled up their pockets with that thing. Currently, institutions are slowly entering the markets, ensuring they are buying through OTC markets so spot crypto prices (i.e. the prices on public exchanges) aren’t affected too heavily. Of course, there’s no trusted source where we can validate this theory with hard data but hopefully this list of news related to institutions can give you some idea of what’s happening.
Volume of news related to institutions signify strong interest in crypto markets
- Jamaica Stock Exchange to Trade Crypto Assets in 2018
- Another Major Swiss Bank Begins Accepting Cryptocurrency Assets
- Swiss Bank Maerki Baumann Will Service Cryptocurrency Firms, Removing a Major Industry Pain Point
- Germany’s Second Biggest Stock Exchange Launches Crypto Trading of Bitcoin, Ethereum, Litecoin and Ripple
- Japan’s SBI Crypto Exchange Adds Two Major Cryptocurrencies
High OTC exchange volumes signify institutional buying
According to some investors and industry consultants, money managers for pension plans and endowments have been preparing the legal groundwork to invest in cryptocurrencies this year, but are still on the sidelines for now. On the other hand, some sources suggest that institutions are already starting to buy into cryptocurrencies. These sources suggest that OTC exchange volumes are as high as 3x the volumes on public crypto exchanges.
Just read what Eric Wall, a cryptocurrency researcher, said:
“Just read an estimate from the TABB Group (in a $5,000 report) that OTC crypto markets exceed exchange volumes by 2-3x. That would mean 1 to 1.5 million BTC is traded OTC daily. Strange it’s not visible on the blockchain, which shows a meager 100,000 a day.”
Whether institutions are planning to buy cryptocurrencies in the future or are already currently buying, the point is institutions are interested. In particular, institutions seem to be focused on Bitcoin, Ethereum, and Ripple since all the stories are regarding these 3 cryptocurrencies. Therefore, investors should be watching the markets closely and thinking about the consequences of a true institutional buying wave. Once institutions become heavily invested into cryptocurrencies, what will happen to prices? Will institutions be happy watching the prices of bitcoin remain stagnant or will they exercise their market powers to drive prices up?
In the end, institutions are here to make money and they know how to do that better than the average investor. All we can do as savvy investors is to predict where they are going and catch the wave before it’s too late.
“B2B reporter – Content Manager – Contributor – Fintech – Blockchain – Cryptocurrency”
Simon Chou is a B2B reporter and content manager specializing in technology and finance. He has worked with many clients in the fintech and blockchain space. He holds investment positions in bitcoin and other large-cap cryptocurrencies, and has been reporting on cryptocurrency since 2017. Currently, Simon is the content manager for a major cryptocurrency exchange @HybridBlockHQ.