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David Drake

May 10, 2018 Article

As crypto market capitalization increases, volatility goes down

Several events rocked the cryptocurrency market as we embarked on 2018. Market capitalization see-sawed losing more than 48% of its value on the first quarter of the year. From $612 billion, crypto market capitalization went down to $261 billion by the end of March while Bitcoin’s value went down by more than 50%.

Japan, the United States and other countries went after crypto firms suspected of scamming investors after issuing warnings on the need to follow regulations, although not so clear yet. Thereafter Facebook banned crypto ads, Twitter and Google also announced similar bans.

These events have caused many to ask whether this is a crypto dotcom bubble all over again. But some hard critics of the cryptocurrency industry are now changing tune and George Soros is one of them.

After issuing a strong statement that the crypto market was a bubble in n January this year, the billionaire recently issued an internal approval for his fund, the $26 billion Soros Fund Management, to trade cryptocurrencies.

At the same time, Venrock, Rockefeller family’s venture capital firm has also partnered with CoinFund, a cryptocurrency investment company with is base in Brooklyn, to invest in cryptocurrencies and other related projects. In Europe, the Lichtenstein Crown Prince, His Majesty Alois Philipp Maria, has expressed interest in investing $5 billion from family’s fortune in cryptocurrencies.

Market Volume

The Soros’ family office, Rockefeller’s venture capital and royal funds are some of the many institutional investors entering the cryptocurrency space. Many see their entry as significant in giving the cryptomarket the boost it needs.

According to Tali Rezun, CEO and co-founder of
4th Pillar, institutional investors will increase trading volumes in the cryptocurrency market. As the volume of crypto market cap grows, volatility will reduce. He says, “These investors usually invest long-term and that is what this market lacks. To diminish volatility, the cryptocurrency market needs institutional investors.”

Bitcoin futures will also increase market volumes because it can be traded and regulated in public crypto exchanges, and thus encourage investments. Oftentimes, institutional investors offer this type of contract to their clients.

Alicia Belzberg, CEO of
Infinigon Group says, “One of the main drivers of increased institutional interest in cryptocurrencies is the launch of Bitcoin futures contracts on the CBOE and the CME, and thus the introduction of Bitcoin into the world of institutional trading.”

Right Timing

According to Anindya Chanda, Vice President of
Avalon Labs, seasoned investors like institutional and family offices enter a market at the right time, when prices are low and about to go up.

“This is a clear signal that the market has corrected itself and is ready to start on its next boom. As more smaller investors follow the lead – increased buying activity will deter the kind of volatility that we’ve seen over the last few months,” he says.

Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.

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