One of the biggest concerns among crypto observers and even investors today is the protracted bear market. 2017 was a big year for cryptocurrencies. For Bitcoin that started at around $1,000, it was able to skyrocket all the way to near $20,000. Though it has caught the attention of investors who were in it just for the quick profits, it has also attracted the attention of regulators. By the time 2018 entered, Bitcoin and the rest of the crypto market went bearish.
Though regulatory changes brought by agencies bring the promise of regulatory clarity and eventually the entry of institutional investors, this a process that has happened in a slow manner. The SEC has been hesitant towards approving a Bitcoin ETF since there is the possibility of price manipulation within the market. Even Jay Clayton who is the agency’s chairman mentioned the lack of tools in crypto exchanges to monitor possible price manipulation.
Institutional Investors Hesitant to Enter the Market?
By next year, Mike Novogratz believes that the crypto market is going to recover. He believes that institutional investors will play a major role in this. However, global market strategist Nikolas Panigirtzoglou along with a team of JP Morgan analysts believes that institutional investors are scared by the current bear market.
The research mentioned that “Participation by financial institutions in Bitcoin trading appears to be fading”. Panigirtzoglou also mentioned that the crypto trading volume is dwindling along with the interest in Bitcoin futures.
Altcoins Are Down
Based on the JP Morgan report, “Other cryptocurrencies continue to suffer disproportionately during this correction phase”. The report also discussed the effects of the current bear market to miners. “This suggests that prices have declined to a point where mining is becoming uneconomical for some miners, who have responded by turning their mining rigs off”.
Since the Bitcoin Cash hard fork, it has affected the crypto market to the point where the hash rate in the Bitcoin network has dwindled. And also, many of the equipment have become unpractical to use. In fact, there were reports where some mining rigs were being sold as trash.
Is Mining Cost a Good Benchmark of the Future?
For Barry Silbert who is the founder of Digital Currency Group, he believes that it is the wrong outlook to take a look at the cost of mining as the benchmark when it comes to the value of digital currencies. He said that “You have to separate the investment decision that a miner is making from the operating cost for them to mine the Bitcoin”. He also mentioned that “the mining business that have been created over the past five years have accumulated massive amount of capital. they have the ability to continue mining at a loss (because they’re going long)”.
What Makes JP Morgan Doubt Bitcoin?
It’s a good idea to take a closer look at the top of the JP Morgan corporate ladder in order to understand where the doubt is coming from. You have the CEO Jamie Dimon who called Bitcoin as a “fraud”. He even said that “I don’t really give a shit (about Bitcoin)”. Could this be the reason why JP Morgan thinks that institutional investors are scared to enter the crypto market?