One of the reasons why Satoshi Nakamoto designed Bitcoin is because of the 2008 economic crisis. This was the time when a lot of people lost their faith in central banks and Wall Street. And for this reason, Bitcoin, unlike fiat currency, isn’t tied to a country’s economy. And since it makes use of blockchain technology, this means that it also doesn’t rely on a central bank to confirm transactions.
In 2017, we’ve seen Bitcoin’s bullish run that made almost $20K in mid-December. Unfortunately, Bitcoin has dropped significantly floating around $6,500 recently. For Mike Novogratz, he thinks that Bitcoin has bottomed already. And he is really not alone in this prediction.
According to research conducted by Fundstrat, 72% of institutional investors believe that cryptocurrencies will rise in an event of a recession. Also, more than half of institutional investors think that Bitcoin has bottomed.
Economic Crisis and Crypto Adoption
Crypto adoption has risen in countries that have experienced economic problems. For instance, you have Venezuela. Bitcoin trading in the country has risen considering that it is suffering from hyperinflation. In addition to this, businesses are now accepting Dash. And the most surprising is that the Maduro administration is even made a state-backed cryptocurrency. The Petro is first of its kind since it also now backs a new currency by Venezuela.
Is crypto adoption and utility expected to rise in case there’s an economic crisis? Could this actually be the case? Are institutional investors right this time?
For Mati Greenspan who is the senior market analyst at eToro, he said that it isn’t exactly sure that cryptocurrencies are going to rise in case there’s an economic crisis. He said that “I don’t think it’s binary”. Greenspan also added that “If we look over the past few years crypto have had a unique correlation with high-risk assets. They have risen as investors sought additional risk”.
But Greenspan understands why most institutional investors think of it this way. He discussed that “Bitcoin was built on the ashes of the financial crisis to provide an alternative to fiat money run by governments and banks. If there was a catalyst that would make people question the role of these institutions then I can see them moving higher”.
But the US economy has been moving at a rapid pace since 2014. Then what explains Bitcoin’s price movement?
Institutional Investors Becoming Pro Crypto?
Though 2018 is bearish for the crypto market, it is undeniable that there is slowly the participation of institutional investors into the crypto market. For instance, ICE even teamed up with Microsoft and Starbucks while there is also the participation of Goldman Sachs. And today, even banks are utilizing crypto solutions such as Ripple products.
There is also the possibility that a Bitcoin ETF might actually get approved soon. The US Securities and Exchange Commission may have rejected Bitcoin ETF applications because of the possibility of price manipulation, there are those who think that the Solid X and VanEck Bitcoin ETF proposal has a strong chance of getting approved.
According to Fundstrat’s survey, it also discovered that Central banks have the highest influence in affecting crypto price.