WILL CRYPTO MARKETS TURNS BULLISH AGAIN IN 2019?

Last year, reports emerged that George Soros and the Rockefeller family were beginning to take positions in the emergent crypto asset class, according to Bloomberg. The family’s $26 billion Soros Fund Management was supposedly considering trading digital assets. The Rockefeller family’s VC arm, Venrock, decided to take a different approach by partnering with Coinfund to assist entrepreneurs in launching blockchain businesses.

Mike Novogratz, the chief executive officer of Galaxy Investment Partners, said he sees Q1 and Q2 2019 as a period when more institutions will start to come into crypto. He also expects the crypto markets to turn bullish again in 2019.

Crypto Is Not a Playground Anymore
Previously, investors were hesitant to enter the crypto markets due to high volatility and lack of regulation, but this is changing, with large players starting to take positions. How Institutional Investors Are Changing the Cryptocurrency Market

Stefan Neagu, co-founder of digital identity management system Persona, said: “BTC attracted large players, as the institutional investors saw BTC as an investment instrument. This helped the crypto market because it was not a playground anymore, but rather the sandbox of a limited group of people with money from a real economy being shifted to the crypto market.”

In 2018, over-the-counter (OTC) market makers have thrived, with many institutional traders shifting to OTC. Etoro announced that it had opened an OTC platform for institutional buyers and Coinbase and Hodl Hodl launched OTC desks in November.

According to cryptocurrency research group Diar, institutional cryptocurrency trading on traditional exchanges has been diminishing in volume due to BTC being welcomed into major outfit portfolios this year. There has instead been a shift to OTC trading.

During OTC market hours, there has been an increase in BTC trading volume by 20 percent, while Grayscale’s Bitcoin Investment Trust (GBTC) volumes were down 35 percent in 2017 vs. 2018 for the same period. It seems institutional traders might be shifting towards higher liquidity OTC physical BTC markets.

Coinbase records more BTC trading volume than Grayscale’s Bitcoin Investment Trust (GBTC) on its OTC markets where the institutional cryptocurrency product is listed.
Liquidity Issues and Susceptibility to Manipulation
Another issue with the cryptocurrency market is low liquidity and its susceptibility to manipulation. The increased entry of institutional investors may have helped anchor the current market and distort prices.

Neagu said: “I doubt that this [increased institutional investor] interest will cause liquidity issues. I don’t see any reason why the crypto market should be different than the stock market. As for distorting the prices, I don’t think that they would see any big ripples.” He added: “Let’s remember that the Mt. Gox trustee sold $230 million worth of BTC in four months, and they did it using exchanges, not OTC desks. For the moment, the “weight” of these institutional players is not that big to send the BTC price down.”