Crypto markets went through hell in the past couple of weeks. Since the start of the final week of November however, we are seeing prices stabilizing. The massive carnage across crypto markets that saw Bitcoin trading below $3500 on Sunday appears to be over for now. Speculation about new futures contracts could be stabilizing the price.
Today, a broad-based risk assets rally is also causing heads to turn. Coincidentally (or not), the news that NASDAQ is strongly committed to launching BTC futures in Q1 of 2019 could have been the trigger for sizeable buying of cryptos.
Bitcoin has risen close to 15 percent on a day when the Fed chairman Powell finally caved to political pressure from Donald Trump and signaled a pause in rate hikes. The headlines caused a broad-based decline in the value of the US dollar with cryptos in fashion again.
Daily chart of Bitcoin, Source: TradingView
NASDAQ is a Heavyweight
While the Fed is controlling the value of fiat money, the importance of the entry of NASDAQ into the Bitcoin futures market cannot be underestimated.
The CEO of decentralized stock exchange DSTOQ, Craig Mc Gregor, said: “Despite the obvious recent changeability of the market, the underlying value of crypto remains Blockchain technology and its capacity to solve real-world problems. This fact is acknowledged in the commitment to bitcoin futures from major traditional players such as Nasdaq, Cboe, and CME.”
Mc Gregor further highlights that the entrance of a sizeable player like NASDAQ into the market matters. While he reiterates that the second largest exchange in the world wouldn’t waste resources if it weren’t confident of a rebound in the value of BTC, the reality is that nobody knows when will this market will recover.
What matters in the case of the new Bitcoin futures contracts are the specifics. As the CBOE and the CME introduced their products last year, the level of leverage provided to investors was quite low. The conservative approach to the market mimicked times of great uncertainty for the outlook for Cryptocurrencies last December.
Is Traditional Finance Involvement Good?
There are varying opinions on whether the entry of NASDAQ into crypto is a good thing. The CEO and Co-Founder of digital asset class portfolio management firm INVAO, Frank Wagner thinks that the reports prove that traditional finance industry players are interested in the asset class.
“Traditional investors, both institutional and retail, want trusted, guided routes into the crypto market and futures provide an approachable introduction, allowing them to bet on future prices without having to actually buy the asset. I foresee sustained interest building in this area in the months ahead,” Wagner said.
We keep hearing that the entry of traditional financial industry products is good for the market. If we were to rewind the tape to last December, the top in the market coincided with the launch of futures contracts by the CBOE and the CME.
“The news that Nasdaq is continuing with plans to launch bitcoin futures contracts early next year is a welcome sign of confidence in the crypto industry,” said Thomas Schouten, Head of Marketing at Lisk.
The crypto dead cat bounce reminds me of March 2009, when all confidence in the markets was evaporated, and only big players were able to afford to take on risk. The difference between blockchain infrastructure and cryptocurrencies has been highlighted numerous times.
That said, none other but Amazon just announced that it is also venturing into blockchain tech. The entry of traditional tech companies will broaden investment opportunities into distributed ledger technologies. Ultimately, the choice of whether to endorse cryptos or proven tech giants is all yours. You can always stay out too, but this ship could be too big to miss.
