- After breaking a record high of $ 58,000 last Sunday, bitcoin slipped to $ 47,000 on Friday.
- Despite regulatory uncertainty, three CEOs of fund managers are still bullish.
- They explain why bitcoin is still in its infancy and poised to become a gold-like market cap.
- Visit Insider’s Business section for more stories.
Does bitcoin enter a
bear market
?
After digital currency slipped from its record high of $ 58,000 last Sunday to $ 47,000 on Friday afternoon, its biggest weekly loss since falling 33.5% last March, some skeptics say bitcoin is on its way to fall, if not already, into a bear market.
Unsurprisingly, Bitcoin bulls view the decline as a healthy pullback or an opportunity to buy the decline.
“We are trading below $ 20,000 at the start of December and have advanced almost $ 60,000. Given the scale of this movement, it is not surprising to see a pullback,” Matt Hougan, director of Bitwise Asset Management’s investments at $ 1 billion, said in an email interview on Tuesday when bitcoin fell to $ 45,580.
Hougan, whose company manages a bitcoin fund, believes the main driver of this bull market is still in place. Unlike previous bull markets driven by retail participation, this one is propelled by companies, hedge funds, financial advisers, and institutions moving bitcoin across their balance sheets and into their wallets for the first time.
“We are still in the early stages of this process,” he said. “As long as it is not completed or interrupted, the underlying thesis remains intact.”
Cathie Wood, CEO and CIO of $ 60 billion Ark Invest, shares Hougan’s sentiment.
“When you think of the market cap or the value of the bitcoin network is around $ 900 billion to $ 950 billion. Think of it in the context of an Apple [stock], that’s less than half of Apple’s valuation, ”Wood said during a panel at the Bloomberg Crypto Summit Thursday.
“Here we are talking about the world’s reserve currency of crypto assets, the world’s first digital monetary system,” she added. “It’s a very big idea, and now we have institutions that embrace this idea.”
Regulatory uncertainty
Bitcoin’s market cap topped $ 1 trillion for the first time just a week ago before falling back to around $ 850 billion on Friday afternoon.
Wood, whose company owns more than seven million shares in the Grayscale Bitcoin Trust, believes the digital token still has “billions of dollars in market capitalization potential.”
But in order for more investors to agree and opponents to change their mind, bitcoin must first pass an intensified regulatory review. Treasury Secretary Janet Yellen said on Monday that bitcoin was an “extremely inefficient way to conduct transactions” and warned investors of the potential losses associated with trading the “highly speculative asset”.
Speaking on the same panel as Wood, Michael Sonnenshein, CEO of $ 39.1 billion Grayscale Investments, said he remains hopeful that U.S. regulators will continue to engage with the crypto industry.
One particular positive sign is Garry Gensler, President Biden’s choice to head the Securities and Exchange Commission. The former chairman of the Commodities Futures Trading Commission taught blockchain and digital currencies at MIT Sloan School of Management and was known for his in-depth understanding of market structure and fintech.
But overall, regulatory attitudes towards bitcoin have already evolved over the years.
“The fact that we now have tangible comments and / or policies related to this asset class from the SEC, CFTC, Internal Revenue Service, Financial Crimes Enforcement Network and Treasury, adds certainly some validation to the sustainability of the asset class “Sonnenshein said.
Even Bitcoin’s regulatory restrictions in China could help its regulatory acceptance in the United States, according to Wood.
While bitcoin is not outright banned in China, many crypto-related activities are banned there. Adding to the complication is the efforts of the Chinese central bank to develop its own digital yuan.
“Bitcoin’s blockchain is open-source technology. And China, mainly for reasons of capital controls, really wants to limit its exposure and wants its own. [digital] “I think that’s a really important point because open source technologies, if you want to isolate your country from all this innovation, it’s a competitiveness issue.”
A young active person still in full maturity
Despite all the controversy and scrutiny surrounding bitcoin, investors should remember that digital currency is still only 12 years old, according to Jan Van Eck, managing director of $ 55.4 billion Van Eck Associates.
“I think price volatility turns people off,” he said in an interview Thursday. “But what I would say is that he’s just a young worker. It increases his maturity and more and more people are getting involved every day.”
Van Eck, whose eponymous company has filed and withdrawn multiple applications for a bitcoin ETF in recent years, re-applied earlier this year.
He first spent time studying bitcoin in early 2017 and was immediately impressed with its limited supply, its gold-like appeal to investors, and its store-of-value nature.
“To be honest, I wasn’t really that excited about blockchain technology per se, because to me it felt like another database technology,” he said. “Databases are great, but bitcoin seems more scalable.”
Even then, Van Eck understood that bitcoin could expect an 80% drawdown given its price swings in previous cycles. Indeed, bitcoin entered a downward spiral after hitting nearly $ 20,000 in December 2017 and did not recover significantly until last year.
However, over the past six months, bitcoin has suffered a 25% to 30% drawdown, which could be a sign of its declining volatility, according to Van Eck.
“I think if you’re in the 25% to 50% correction range, it’s significantly more normal,” he said. “I’m definitely of the school that, as its adoption increases, its price volatility will continue to decrease.”
Additionally, he believes that as its volatility decreases, bitcoin is likely to mature to a level commensurate with the market cap of gold, which stands at around $ 12 trillion.
“I don’t see why the market cap of bitcoin can’t be half of it. In history, there have been alternatives to gold like using silver, or sometimes platinum. , which date back hundreds of years, ”he said. “A new digital gold may emerge and play a significant role, which would put bitcoin in a range of $ 200,000 to $ 400,000.”
- After breaking a record high of $ 58,000 last Sunday, bitcoin slipped to $ 47,000 on Friday.
- Despite regulatory uncertainty, three CEOs of fund managers are still bullish.
- They explain why bitcoin is still in its infancy and poised to become a gold-like market cap.
- Visit Insider’s Business section for more stories.
Does bitcoin enter a
bear market
?
After digital currency slipped from its record high of $ 58,000 last Sunday to $ 47,000 on Friday afternoon, its biggest weekly loss since falling 33.5% last March, some skeptics say bitcoin is on its way to fall, if not already, into a bear market.
Unsurprisingly, Bitcoin bulls view the decline as a healthy pullback or an opportunity to buy the decline.
“We are trading below $ 20,000 at the start of December and have advanced almost $ 60,000. Given the scale of this movement, it is not surprising to see a pullback,” Matt Hougan, director of Bitwise Asset Management’s investments at $ 1 billion, said in an email interview on Tuesday when bitcoin fell to $ 45,580.
Hougan, whose company manages a bitcoin fund, believes the main driver of this bull market is still in place. Unlike previous bull markets driven by retail participation, this one is propelled by companies, hedge funds, financial advisers, and institutions moving bitcoin across their balance sheets and into their wallets for the first time.
“We are still in the early stages of this process,” he said. “As long as it is not completed or interrupted, the underlying thesis remains intact.”
Cathie Wood, CEO and CIO of $ 60 billion Ark Invest, shares Hougan’s sentiment.
“When you think of the market cap or the value of the bitcoin network is around $ 900 billion to $ 950 billion. Think of it in the context of an Apple [stock], that’s less than half of Apple’s valuation, ”Wood said during a panel at the Bloomberg Crypto Summit Thursday.
“Here we are talking about the world’s reserve currency of crypto assets, the world’s first digital monetary system,” she added. “It’s a very big idea, and now we have institutions that embrace this idea.”
Regulatory uncertainty
Bitcoin’s market cap topped $ 1 trillion for the first time just a week ago before falling back to around $ 850 billion on Friday afternoon.
Wood, whose company owns more than seven million shares in the Grayscale Bitcoin Trust, believes the digital token still has “billions of dollars in market capitalization potential.”
But in order for more investors to agree and opponents to change their mind, bitcoin must first pass an intensified regulatory review. Treasury Secretary Janet Yellen said on Monday that bitcoin was an “extremely inefficient way to conduct transactions” and warned investors of the potential losses associated with trading the “highly speculative asset”.
Speaking on the same panel as Wood, Michael Sonnenshein, CEO of $ 39.1 billion Grayscale Investments, said he remains hopeful that U.S. regulators will continue to engage with the crypto industry.
One particular positive sign is Garry Gensler, President Biden’s choice to head the Securities and Exchange Commission. The former chairman of the Commodities Futures Trading Commission taught blockchain and digital currencies at MIT Sloan School of Management and was known for his in-depth understanding of market structure and fintech.
But overall, regulatory attitudes towards bitcoin have already evolved over the years.
“The fact that we now have tangible comments and / or policies related to this asset class from the SEC, CFTC, Internal Revenue Service, Financial Crimes Enforcement Network and Treasury, adds certainly some validation to the sustainability of the asset class “Sonnenshein said.
Even Bitcoin’s regulatory restrictions in China could help its regulatory acceptance in the United States, according to Wood.
While bitcoin is not outright banned in China, many crypto-related activities are banned there. Adding to the complication is the efforts of the Chinese central bank to develop its own digital yuan.
“Bitcoin’s blockchain is open-source technology. And China, mainly for reasons of capital controls, really wants to limit its exposure and wants its own. [digital] “I think that’s a really important point because open source technologies, if you want to isolate your country from all this innovation, it’s a competitiveness issue.”
A young active person still in full maturity
Despite all the controversy and scrutiny surrounding bitcoin, investors should remember that digital currency is still only 12 years old, according to Jan Van Eck, managing director of $ 55.4 billion Van Eck Associates.
“I think price volatility turns people off,” he said in an interview Thursday. “But what I would say is that he’s just a young worker. It increases his maturity and more and more people are getting involved every day.”
Van Eck, whose eponymous company has filed and withdrawn multiple applications for a bitcoin ETF in recent years, re-applied earlier this year.
He first spent time studying bitcoin in early 2017 and was immediately impressed with its limited supply, its gold-like appeal to investors, and its store-of-value nature.
“To be honest, I wasn’t really that excited about blockchain technology per se, because to me it felt like another database technology,” he said. “Databases are great, but bitcoin seems more scalable.”
Even then, Van Eck understood that bitcoin could expect an 80% drawdown given its price swings in previous cycles. Indeed, bitcoin entered a downward spiral after hitting nearly $ 20,000 in December 2017 and did not recover significantly until last year.
However, over the past six months, bitcoin has suffered a 25% to 30% drawdown, which could be a sign of its declining volatility, according to Van Eck.
“I think if you’re in the 25% to 50% correction range, it’s significantly more normal,” he said. “I’m definitely of the school that, as its adoption increases, its price volatility will continue to decrease.”
Additionally, he believes that as its volatility decreases, bitcoin is likely to mature to a level commensurate with the market cap of gold, which stands at around $ 12 trillion.
“I don’t see why the market cap of bitcoin can’t be half of it. In history, there have been alternatives to gold like using silver, or sometimes platinum. , which date back hundreds of years, ”he said. “A new digital gold may emerge and play a significant role, which would put bitcoin in a range of $ 200,000 to $ 400,000.”