Cryptocurrencies could go on a bull run greater than last year and pass the trillion-dollar mark in terms of value, experts told CNBC, following a recent violent sell-off across digital coins.
At its lowest point on Tuesday, the total cryptocurrency market saw over $550 billion wiped off its value. But industry insiders see another rally ahead.
“Increasing regulatory recognition of cryptocurrency exchanges, the entrance of institutional capital and major technology developments will contribute to the market’s rebound and push cryptocurrency prices to all new highs this year,” Thomas Glucksmann, head of APAC business development at cryptocurrency exchange Gatecoin, told CNBC by email on Tuesday.
“There is no reason why we couldn’t see bitcoin pushing $50,000 by December.”
CFTC Issues Surprisingly Tolerant Commentary on Cryptocurrency at Senate Hearing
With major banks blocking customers from buying Bitcoin with credit cards and governments cracking down on cryptocurrencies, a Senate hearing on the topic Tuesday was a surprising respite for HODLers (hold on for dear lifers).
The Senate Banking Committee heard testimony from the chairman of the Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, and the chairman of the Securities and Exchange Commission (SEC), Jay Clayton, on the potential dangers of digital currencies as investments. Their testimony, amid a crackdown on Bitcoin exchanges in China and South Korea, wasn’t as negative as many cyrptocurrency investors had feared.
As a result, Bitcoin prices rose to $7,650 on Tuesday, after dipping below $6,000 just a day earlier.
“We owe it to this new generation to respect their enthusiasm for virtual currencies, with a thoughtful and balance response, and not a dismissive one,” Giancarlo said.
Ok, that's it, the Chairman of the US Commodity Futures Trading Commission just described "HODL" and how it fascinates him. If that isn't an indicator that crypto is here to stay, then I don't know what is. https://t.co/psFNSGN5Jt
— Giuseppe Stuto (@gstuto) February 6, 2018
The technology advancements Glucksmann referenced include bitcoin’s so-called Lightning Network, which would boost the very slow transaction speeds using the cryptocurrency.
“One possible appetizer for the bulls, or the catalyst for the recovery, will be the release of another cryptocurrency backed instrument listed on a major exchange. There are several candidates in the pipeline, it’s only a matter of time until we have a cryptocurrency backed ETF (exchange-traded fund).”
Last year, the CME and CBOE both released bitcoin futures productsthat people could trade. And Nasdaq CEO Adena Friedman told CNBC in a recent interview that the exchange was “continuing to investigate” cryptocurrency futures.
There is still not a bitcoin ETF or exchange-traded fund on the market. An ETF tracks the price of an asset and would allow people to trade bitcoin without having to buy the digital currency on an exchange. Noted cryptocurrency investors Cameron and Tyler Winklevoss, the brothers who founded the Gemini Trust digital currency exchange, had an ETF application rejected last year.
‘Crypto winter’ is coming
The recent cryptocurrency sell-off came after huge price rises for many coins last year. Bitcoin was up nearly 1,300 percent, while ethereumrose over 8,000 percent and ripple surged over 32,000 percent.
Even though the price rises were massive, some experts think that this year could be even bigger.
“We believe after February the market will likely go on a bull run comparative if not greater than last year potentially reaching the trillion-dollar mark before a proper crypto winter sets in where the market becomes more focused on proper market fundamentals,” Jamie Burke, CEO at Outlier Ventures, a venture capital firm that focuses on blockchain investments, told CNBC by email on Tuesday.
Hedge Funds & Institutional Money Flow
Institutional money is expected to flow into cryptocurrencies once Bitcoin is believed to have bottomed. A ton of capital has already been flowing into the exchange-traded funds business. Investors poured about $240 million into two blockchain-focused ETFs in the 1st week of their launch. In addition to that, the number of new Blockchain technology and cryptocurrency hedge funds could triple in 2018 as Wall St. shows up to the party.
Several hedge funds rushed Into the space in the second half of 2018 while seasoned Managers were cautious of the frenzy.
Given how many new crypto-millionaires were minted in 2017, complete newbies and others with little understanding of the technology or investment experience rushed in to capitalize. Many started funds with Bitcoin and other cryptocurrencies at or near all-time highs.
Because of the frenzy, some seasoned players in the space refrained from jumping in. William Mougayar, general partner at early stage fund Virtual Capital Ventures and author of The Business Blockchain who organized Token Summit, wrote via email, “I don’t want to be in the difficult position of explaining to my limited partners 8-14 months from now why the assets have dropped by 80% within a week.”
Michael Novogratz, the former macro manager who’s turned into one of the biggest champions of bitcoin, shelved plans to start a cryptocurrency hedge fund and predicted that the digital money may extend its plunge to $8,000. Novogratz isn’t giving up on them and said he still believes they’ll be a disruptive force in finance. He had said this month that bitcoin could reach $50,000 by the end of next year — upping his previous estimate of $40,000.
Matt Siebenthal, former macro Advisor and professional trader, is another huge believer in Blockchain Technology and the potential for it to revolutionize industry. Siebenthal shared similar sentiment in December with concern for valuations while many carelessly entered the space. The founder of BlockWealth Capital also postponed plans to launch a crypto hedge fund- citing a possible correction to 7500 or lower before the cryptocurrency market- led by Bitcoin resumes it’s uptrend, anticipating a bull run similar to 2017. “If you follow the charts, there have been several big sell offs in January, usually followed by even bigger rallies.”
‘Utility tokens’ to watch
Many commentators have noted that bitcoin and other cryptocurrencies have no fundamental value. But others have suggested that digital tokens like ethereum, which can be used to build new blockchain applications, could have value in the future as the industry moves forward and develops.
Some companies like IOTA and NEO are trying to create blockchain platforms that developers can build on. Those applications can be powered by IOTA or NEO tokens. The same is true of ethereum. Mick Sherman, co-founder and CEO of Hercules Tech, a data science company focusing on blockchain and big data, said these are the digital coins that could see their prices appreciate the most this year.
“Utility tokens and assets with a working platform and a clear-cut reason for requiring both a blockchain and their own token, are more likely to appreciate in value this year. Some of these cryptoassets will not be used for years, meaning they have no utility value,” Sherman told CNBC in an email on Tuesday.
The CEO warned that many of the blockchain projects could be years away and more bubbles could arise.
“The revolutionary nature of blockchain technology is what’s driving the hype and even though we may be years away from viable blockchain-based assets, we may very well see several more bubbles,” Sherman said.
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