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A year ago, Bitcoin was talking about Thanksgiving dinner tables all over the country. More than 100,000 people have created new Coinbase trading accounts in just three days during the holiday week, the company said at the time.
Wall Street has rapidly increased its ambitions, working feverishly to build a commercial cryptocurrency infrastructure.
What has happened since then is a nightmare reworking of a famous Kevin Costner movie line Field of dreams: If you build it, they will not come.
A dip in the depth of Bitcoin's value seems to have broken the hopes that the cryptocurrency will become an accepted asset class. Starting from a maximum of $ 19,700 in December 2017, the cryptocurrency traded at $ 4,300 on Friday, a decrease of 78%.
Those who have opened cryptocurrency trading accounts in the last year are under water. And most of the financial institutions are silent about their ambitions in Bitcoin. Even the first offers of coins that were advertised as the most exciting risk capital investments in 2017 have vanished.
Now, Bitcoin is facing an existential crisis: what if nobody wants to exchange things?
It was expected that the increase in institutional encryption would get new heights on Bitcoin. This helped attract Denver financial adviser, 42-year-old James Brewster, who invested about $ 10,000 in Bitcoin and other encrypted ones. "When the futures products were launched, it seemed that there could be a possibility of mass adoption," he says. "The hypothesis was that once more institutions were involved, it would increase the price".
The value of Brewster's investments has declined slowly, to about $ 6,000 now, and it is less optimistic that the institutions will be the savior of the crypto. The strange fluctuations in Bitcoin prices have convinced him that the market is being manipulated and expects it will keep traditional players on the sidelines. "If this kind of thing is happening, no institution with half a brain will be involved," he says.
The fall in prices has even defused the kind of people who would normally be drawn to the revolutionary promise of decentralized currencies. University students were fascinated by last year's encryption, recalled Mark Williams, a professor at Boston University who teaches fintech. Of the approximately 100 students in his class, most chose to do cryptocurrency and blockchain research projects in that semester.
Today his students have switched to other projects. "My students would prefer to work on robo-advising and peer-to-peer loans now," Williams says. "Anything with Crypto is Kryptonite."
With investments in Bitcoin, university students and retail investors actually count. The most coherent correlation has nothing to do with financial assets like stocks, dollars or gold. Instead, the price moves in tandem with the search term "Bitcoin" in Google Trends. With the fall in Bitcoin prices and newspaper headlines, new Bitcoin buyers have lost their appeal and the price has declined even further. Without them, Wall Street's efforts become more challenging.
Some of the most important cryptocurrency investors hoped that institutional money could stabilize and grow the market.
"Because encryption fulfills its destiny, because the decentralized revolution really changes the business landscape in America, it needs institutional money," said Mike Novogratz, a well-known Wall Street agent who now runs a merchant bank focused on the crypt. October. "Two hundred billion capitalization will not change the world". He says the market must get to trillions before it changes the world.
It is not worth even $ 200 billion. Digital coins are valued collectively at $ 140 billion, according to coinmarketcap.com. Bitcoin's capitalization has fallen to around $ 75 billion since Friday. The previously hottest investment in the world is now worth less than both tobacco producers
Altria Group
(ticker: MO) or scotch
3M
(MMM).
At the conference where Novogratz spoke, Fidelity Investments announced that Bitcoin will start trading for institutional clients next year and will hold digital assets in custody for customers, a service that has been difficult to find in the industry . When Bitcoin increased by 10% a day, and the established Wall Street traders were stealthily crypting even while some of their bosses had burned, this kind of service seemed like a smart move. Now this is less clear.
Certainly, some institutional investors have invested in Bitcoin and the cryptocurrency funds continue to survive. There have been 632 crypto funds since last week, with only 35 fund closures confirmed this year, according to Crypto Fund Research. Bitcoin futures continue to trade, with
CME Group
& # 39; S
futures reach new highs only last week.
But comparing futures trading with other high volume assets shows that this is a very small drop in a very small bucket.
CME
& # 39; S
the all-time high of 14,490 Bitcoin futures contracts (each valued in five Bitcoin) traded on November 20 was lower than the 1.58 million futures contracts on oil and the 307,000 futures contracts traded on the same day.
Bob Iaccino, a Chicago trader and entrepreneur, may seem like the ideal customer for an institutional encryption product. He negotiates several forward products at CME, believes digital currencies may eventually replace cash, and he is enthusiastic about Fidelity's entry.
But he has never traded Bitcoin futures and says he is not sure if he will.
"The scrambled people need an adult in the room," he says. "We do not have an adult in the room right now."
Write to Avi Salzman at [email protected]
