It was a difficult year for bitcoin "hodlers" who had to look at the price of the world's largest digital currency loss of over 50% since the start of the year. Here are five reasons to keep faith
1. The Bitcoin institutional ecosystem is growing
The announcement of the intention of Intercontinental Exchange to launch an exchange of digital resources intended for institutional investors is perhaps the biggest news for cryptographic assets this & # 39; year
Intercontinental Exchange (ICE) is the company behind the New York Stock Exchange and its plans provide for the construction of an exchange that will allow investors to trade futures on digital assets, which will include physical delivery bitcoin futures.
While bitcoin can already be considered a valid asset class alternative for both retail and institutional investors The opening of a new cryptographic asset exchanged with a Wall Street giant is exactly what bitcoins must accept from the community of institutional investors.
Through the pond, the second German stock exchange, the Börse Stuttgart, also announced plans to initiate a cryptographic asset exchange. According to FinExtra Börse Stuttgart is developing an exchange of initial coin offers, a market for cryptocurrency trading and a secure deposit for cryptographic assets.
While bitcoin has yet to become a regular feature of institutional portfolios, the barriers to entry for institutional investors are being phased out and, with ICE hoping to launch the solution for exchange and custody by November, the much discussed institutional "pump" could only take months.
2. Regulators have accepted that Bitcoin is here to stay
One of the biggest risks to bitcoins over the years has been the regulatory risk and the possibility that governments and financial regulators try to eliminate Bitcoin and other altcoins because of their potential for disintermediate consolidated financial institutions.
Even at the start of 2018, regulatory risk played a role in the decline in bitcoin prices until the March G20 meeting in which the global cryptocurrency legislation was discussed.
Fortunately for investors of cryptographic assets, the legislators present at the G20 meeting came to the conclusion that cryptocurrencies do not threaten the global financial system and that there will not be a global push against cryptocurrency innovation.
In addition, several countries have taken a more positive stance towards cryptocurrencies to attract the booming blockchain industry. Countries such as Belarus, Bermuda, Gibraltar, Malta and Switzerland, for example, are competing to become major blockchain centers, while the fourth largest economy in the world, Germany, now officially accepts bitcoin as a legal payment method.
3. A Bitcoin ETF will arrive (sooner or later)
While it is difficult to say with absolute certainty that we will be witnesses of a publicly quoted Bitcoin ETF part of the bitcoin leaders and experts agree that it will only be a matter of time.
Not only is there a pile of new Bitcoin ETFs hitting the SEC desk waiting for approval, but more importantly, SEC Commissioner Hester Peirce has announced that he disagrees with the recent decision of the SEC rejects ETF Winklevoss Bitcoin and believes that the disapproval of the Bitcoin ETF dampens innovation.
"I am worried that the Commission's approach will undermine investor protection by preventing a greater institutionalization of the bitcoin market, and greater institutional involvement would improve many of the Commission's concerns with the bitcoin market at the base of its disapproval order ", he declared in a written dissent .
In addition, with the bitcoin regulated futures already approved by the US Commodity Futures Trading Commission (CFTC) and trading on both the CBOE and the CME, it is difficult to imagine a scenario where a Bitcoin ETF will not be approved, as one of the two main US regulators have already given bitcoin its regulatory approval mark.
4. Bitcoin is a large portfolio diversifier
According to a study of Yale University, each diversified investment portfolio should contain between 1 and 6% in bitcoins, depending on the investor's belief in the future of the digital currency.
The authors of the paper, Yukun Liu and Aleh Tsyvinski, have discovered that cryptocurrencies, including bitcoin, have no exposure to the stock market and macroeconomic factors, nor are they related to currencies or commodities. Instead, cryptocurrency returns are driven by specific factors in their market.
In addition, the cryptocurrencies analyzed in the study, BTC, ETH and XRP, show a higher Sharpe ratio than securities or bonds, which means they have a better return to risk-return plus the added benefit of not be related to traditional asset classes
5. Growth in demand in emerging markets
Despite the bear market in 2018, bitcoin trading volumes on the largest peer-to-peer exchange peer, LocalBitcoins, are starting to move towards their highs in 2017 in emerging markets.
Countries such as Kenya, Mexico, Nigeria and the Philippines, for example, have witnessed an increase in trade volumes in recent months. Furthermore, economically distressed nations – whose sovereign currencies have been in a downward spiral – have seen a substantial increase in the adoption of bitcoins. In Argentina Venezuela and Zimbabwe, bitcoin trade volumes reached new highs in 2018.
While most of the emerging market buyers tend to be small retail investors and, therefore, as the market is not moving as individuals with a high net worth or institutional buyers, they still act as an excellent indicator of the global tendencies of bitcoin adoption.
In light of the positive developments of this year for bitcoin, its global acceptance and the growth of its ecosystem, the current Bitcoin price range can provide a good entry point. for long-term investors.