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Bitcoin price as volatile as ever, but is crypto gaining institutional interest?

Bitcoin [BTC] saw a double-digit rally over the weekend that momentarily pushed it past $7,500 on Sunday – a 30% increase from Friday – lifting other cryptocurrencies like ripple [XRP] and ethereum [ETH] in turn. 

In a characteristic bout of volatility, Bitcoin swung back to $6,800 through Sunday afternoon, only to climb back to $7,300 by Monday lunchtime. It marks a return to levels last seen in early September, before a slump that saw the cryptocurrency sink as low as $3,100. However, more bullish analysts anticipate the most-traded cryptocurrency will hold onto most gains following a depressed six months. “The coin is back to its natural, authentic behaviour,” wrote Tomas Salles, technical analyst at FXStreet. 

“A decisive break above 7,160 could encourage the bulls to drive the battle towards the 7,400 territory, defined by the peak of 4 September,” wrote analysts at Cypriot bank JFD.Bitcoin 1-year share price performance, CMC Markets, 16 May 2019


What now? 

There have been hints that institutional players may be warming up to cryptocurrencies, despite their wildly unpredictable trajectories posing a lingering challenge. Earlier this month, asset manager Fidelity Investments published findings of a survey, which indicated considerable interest in digital assets among institutional investors, with family offices and financial advisors reporting the most favourable views.

This week Boerse Stuttgart, Germany’s second-biggest exchange, opened to exchange-traded notes (ETNs) tracking the price of ripple and litecoin against the euro and Swedish krona. The exchange already offers trading and custody of the more popular cryptocoins in a bid to compete with crypto exchanges, whose reputation is periodically marred by cybersecurity lapses and hacking attacks. Just last week, attackers stole over $40m worth of Bitcoin from Binance, one of the world’s largest crypto exchanges by volume.


Amount of bitcoin stolen from Binance last week

While cryptocurrencies remain a fringe asset in the US, where attempts to introduce crypto-based ETFs have so far been struck down by the Securities and Exchange Commission, Europe is looking to gain a lead in regulating the digital assets market.

Last month, France enacted a law to regulate the market, which it’s proposing as an EU-wide standard. The new rules will establish a framework for initial coin offerings (ICOs) and require digital assets providers and traders to adhere to regulations such as anti-money-laundering checks. 

The law also allows brokers, platforms and other digital asset service providers to apply for a licence, which would place them under the supervision of the Autorité des Marchés Financiers (AMF), the French finance regulator. While the licence is not a legal requirement, it’s likely to be attractive to investors. The law also allows funds aimed at professional investors, like private equity funds, to hold cryptocurrencies.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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