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The bitcoin price has been on a decline since January, and analysts believe the mid-term correction of bitcoin was caused by the massive sell-off by Fortress and Mt. Gox trustee. Still, retail investors are seeing a good opportunity to enter the cryptocurrency market.

Institutional Demand

Throughout its 10-year history, bitcoin has had many major corrections. The recent decline from $19,000 to $6,000 was the third worst correction to date, recording a 72 percent drop in value.

History shows that bitcoin has always been able to recover from its major corrections to previous all-time highs and initiate new rallies. Investors like Tom Lee and Peter Thiel have stated that the recent bitcoin correction will be similar to its previous ones, and bitcoin will be able to rebound from its losses in the future.

To recover from the recent correction, analysts unanimously agree that the cryptocurrency market will start to see new volumes coming in, from new investors. Lee explained that the new volumes could come from financial institutions and retail investors, as large-scale traders will see an opportunity to invest in the space after a 72 percent drop in prices across the board.

This week, Jeremy Gardner, a co-founder of the successful blockchain project Augur, revealed that investors in over-the-counter (OTC) markets are seeking for multi-billion dollar bids, to invest in the most dominant cryptocurrency in the market.

In OTC markets, investors often deal with miners or other whale investors that hold significant chunks of bitcoin. Multi-billion dollar bids would not have an immediate impact on the public market or the cryptocurrency exchange market. But, if investors start allocating billions of new dollars into the cryptocurrency market, the bitcoin price will likely increase in the mid-term.

“OTC market demand for bitcoin right now is unlike anything I’ve ever witnessed. Several ask for multi-billion dollar bids,” said Gardner.

Disappointment

Since 2015, the bitcoin and cryptocurrency markets have anticipated the entrance of institutional investors from strictly regulated markets like the bitcoin futures market operated by Cboe and CME Group. But, volumes on those markets have been extremely poor, and the demand from retail traders from the west have been virtually non-existent.

Jon Matonis, a cryptocurrency expert, Visa executive, and co-founder of Bitcoin Foundation, stated that if major financial institutions like Goldman Sachs enter in the near future, it could trigger more institutional investors in the west to enter the cryptocurrency market.

“I think it’s fabulous that they’re getting into it because it brings in new liquidity. They’re going to develop futures markets, options markets, I even think you’re going to start to see interest rate markets around bitcoin. We’re used to hearing things about Libor, the index for bitcoin interest rates is Bibor,” said Matonis.

Already, in Japan and South Korea, retail investors have placed large bids on bitcoin and other major cryptocurrencies.

At the moment, given bitcoin’s lack of momentum, traders anticipate the price of bitcoin to bottom out in the $6,000 mark. If it does, and bitcoin potentially initiates a corrective rally in the short-term, bitcoin could experience a short-term recovery.

Featured image from Shutterstock.

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April 11, 2018 at 10:59AM