Road to $35,000: Institutional investors or ETFs
Prominent investors including Ari Paul, the co-founder of BlockTower, a cryptocurrency hedge fund founded by former Goldman Sachs executive, have said that the next mid-term rally will likely be triggered by institutional investors potentially before the end of 2018.
Paul said that the last barrier preventing institutional investors from entering the cryptocurrency market is the lack of trusted custodianship and a suite of institutional cryptocurrency products. Upon the completion of Coinbase’s custodian solutions and the approval of digital asset companies to operate as custodians, institutional investors may enter the cryptocurrency market.
“Institutional money started trickling into cryptocurrency in mid 2017, but it’s been slower than many expected. That doesn’t mean it’s not coming. There are a lot of pieces that need to come together, one big piece being third party custody. Custody isn’t binary. It’s not like Coinbase custody will launch and suddenly every pension will throw $100 million into BTC. It takes time for custody solutions to gain trustworthiness. But, I think we’ll have solid third party custody by September of this year.”
The entrance of institutional investors into the cryptocurrency market isn’t the only way major digital assets like Bitcoin can increase massively in value. The emergence of publicly tradable instruments like ETFs could also fuel the next rally, and researchers at IronWood believe that ETFs will be the fuel of the next mid-term rally.
Undoubtedly, the market is in amidst of a bad correction, in fact the third worst correction since 2014. The Bitcoin price has fallen 65 percent from their all-time highs and retail investors have started to become more pessimistic in the short-term trend of the market.
But, as it did in 2010, 2014, and 2016, the market is seeing an accumulation period, during which companies start to build products and infrastructures that are necessary to fuel the next rally.
Michael Strutton, the CEO at IronWood, explained in a column that if an ETF is approved by the US Securities and Exchange Commission (SEC), anyone with a 401k, IRA, or an investment account with brokers like Fidelity and Ameriprise Financial can easily invest in the Bitcoin market. Strutton noted that the result of a Bitcoin ETF could be the price of BTC rising to at least $26,000 and below $44,000. He said:
“If ETFs add 24 million US investors and the upward momentum adds 14 million from the rest of the world, then that adds $84 billion and $336 billion, respectively, to the market cap. Over the past six months, Bitcoin’s market cap has swung from $326 to $110 billion. Adding $420 billion to the market cap could put Bitcoin price range from $26,000 to $44,000.”
State of ETFs
The Winklevoss twins, who currently oversee a major cryptocurrency exchange based in the US called Gemini, are working on their own exchange-traded fund (ETF) called Coin. SolidX, who had their ETF turned down by the SEC last year, has partnered with VanEck to increase its chances of being approved by the SEC.
Eric Balchunas, an ETF analyst at Bloomberg, said that a collaboration with VanEck, an ETF manager that oversees 70 ETFs and $45 billion, could pay off and drastically increase the probability of a Bitcoin ETF being approved by the US government.