Bitcoin is the most widely traded cryptocurrency, and the world’s most popular digital currency. It’s small enough to fit in a pocket, but also large enough to make you feel like you’re making a substantial investment. It’s a highly volatile currency, and its price has dropped in recent weeks as the world’s attention turns to other things.
Bitcoin crashed, and that wasn’t the only one of the cryptocurrencies that was affected. The value of the altcoins also took a hit. But in the case of altcoins, the drop in their markets was not as much as in the case of Bitcoin. Of course we are not talking about Bitcoin, which is the most important, but the others. And what is an altcoin? It is a cryptocurrency that is not a Bitcoin. It is as simple as a Bitcoin is a Bitcoin. It is not important to know what a Bitcoin is, because the value of a Bitcoin is the same as the value of a Bitcoin.
The Bitcoin community is passionate, and understandably so. One would have to be, to have invested a chunk of change into Bitcoin early on.. Read more about bitcoin investors list and let us know what you think.The mid-May price drop was one of the wildest declines in cryptocurrencies in recent years, with the market value of cryptocurrencies falling by nearly $1 trillion. A month earlier, bitcoin (BTC) reached nearly $64,000 thanks to institutional investors. Now that calm has returned to the market, the bears are asking: How did the institutions behave during the recent meltdown? Did they give up or stay true to their investment? And what implications might this pushback have for future institutional engagement in the cryptocurrency and blockchain sector? Institutional investors remained mostly unfazed, Edward Moya, senior market analyst at Oanda, told Cointelegraph, and when the dust had settled, [investors] still seemed confident in their long-term investments. Moreover, chief economist Philip Gradwell of Chainalysis wrote in a market analysis on 19… May: Institutions don’t seem to be big sellers either, although they may be more cautious about buying at the moment. On the other hand, analysts at JPMorgan have told clients that institutional investors dropped bitcoin in favor of gold during the weak period. And then there was Elon Musk, whose tweet on the 12th. In May, Tesla announced that it would no longer accept bitcoins in exchange for its cars – out of concern for bitcoin’s energy consumption – and many blamed the decision for accelerating the decline of the bitcoin market. It was already down, but dropped another 40% after his tweet and has since laboriously recovered to $40,000. Economist Gradwell tried to put the situation in historical context by noting that bitcoin’s inflows to the exchanges have been relatively small compared to past sales. This suggests that most sales go to people whose assets are already traded in the securities markets and who are generally retail investors. Many crypto currency veterans agree that the volatility was caused by private investors, not institutions. Freddy Zwanzger, co-founder and chief data scientist at Anyblock Analytics, told Cointelegraph that institutions typically have long-term goals, so if anything, they will tactically take advantage of recent price fluctuations – and likely buy into the market at lower prices. Social media seems to reinforce this view. Zwanzger continued: I’ve also noticed on Twitter that many newbies are panicking and trying to sell cryptocurrencies, while all the OGs are commenting on the profitable trades they’ve gotten in the coming volatile swings that have already happened and will happen again. He added: Almost everyone I know in the industry has bought – or tried to buy – Dip, excited at the prospect of increasing their holdings of cryptocurrencies. Blockchain data shows that BTC has migrated from new wallets to old wallets, suggesting that the newcomers have capitulated, Bobby Ong, co-founder and chief operating officer of crypto data platform CoinGecko, told Cointelegraph : However, it is also important to note that BTC was trading at a premium on Coinbase during the fall when there was a large outflow of funds. This suggests that some institutions bought the dip, but it is more likely that some institutions capitulated. Generally, our clients saw this as an opportunity to rebalance and rebuild their positions at lower prices, Matt Hougan, chief investment officer at Bitwise, told Cointelegraph. Bitwise, which primarily targets financial advisors and other professional investors, has seen net inflows during the recession. Jeff Dorman, chief investment officer at Arca, a firm that manages digital assets, tried to clear up some ambiguities, noting that the term institutional investor is often used incorrectly, reports Cointelegraph : If you think of macro and quantitative hedge funds as institutional investors, they have mostly sold momentum, but traditional institutional investors – pensions, endowments, family offices, and so on – have tried to allocate money and have not been deterred by volatility. – But traditional institutional investors – pensions, endowments, family offices, etc. – have tried to allocate resources and have not been affected by volatility. – have tried to allocate resources and have not been affected by volatility.
Has Musk seen the sign on the wall?
Many media outlets gave Musk’s tweet a score of 12. May blamed the sharp decline in cryptocurrencies, but not everyone was willing to blame the Tesla CEO, who wrote We are concerned about the rapidly increasing use of fossil fuels for bitcoin mining and trading, particularly coal, which has the worst emissions of all fuels. According to Moya, the collapse of cryptocurrencies this month is due to the increase in leveraged trading across Asia, panic selling by most new retail traders and active fund managers who simply followed the momentum. While Hogan largely acknowledged that the main driver of the downturn was the liquidation of overly leveraged retail investors, he also cited growing regulatory risk and China’s view of cryptocurrencies, which appears to be deteriorating. Regarding Musk in particular, Moya made a slightly different point. Initially I thought this was a terrible flip-flop by Musk and ultimately very bad news for Tesla and bitcoin. After thinking about it, I think Musk understood that the media was about to name bitcoin and its impact on the environment. He also added: Musk’s decision to stop accepting bitcoin as a means of payment due to environmental, social, and governance (ESG) concerns has allowed him and other cryptocurrency proponents to define the history and timing of miners’ transition to renewable sources. Mr. Dorman acknowledged that Mr. Musk had raised some sort of environmental flag. Elon Musk’s whimsical tweets have brought ESG into the spotlight, which should give companies and institutional capital pause for thought, he wrote on his blog. Will institutional investors, who have recently become more sensitive to ESG issues, leave BTC for environmental reasons? On the 21st. In May, for example, it was reported that Greenpeace will no longer accept donations in bitcoins for environmental reasons. Moreover, the extraction of BTC consumes a huge amount of electricity – much more than the entire country of Argentina consumes in one year, according to a recent study by the University of Cambridge. Bitcoin and other cryptocurrencies must use renewable energy, Moya continued, adding: Bitcoin will eventually satisfy ESG investors, but for now they just have to support the big financial institutions [who] say they’re working on it. Ethereum is already way ahead of its time, so alternative investments will be available to ESG investors. Bitcoin can be successful in the short term even without the support of the GSE. What about reports of institutional investors abandoning bitcoin in favor of gold? Moya agreed that gold has become more attractive and could outperform BTC in the near term: Bitcoin has dominated Wall Street as the best performing asset in 2020 and the first four months of this year. Institutions that considered bitcoin, but didn’t have the time to pull the trigger, got completely screwed during a gold price spike.
Was the correction too late?
It’s important that May’s downturn doesn’t overshadow cryptocurrencies’ overall momentum. Overall, it was an unusual year. Looking at the big picture, bitcoin has been rising for the past seven months and should have corrected, Ong said. Combined with overcommitted traders, it took a 50% drop to eliminate leverage and continue the momentum of the bull market. Meanwhile, Hogan noted: Even after a setback, bitcoin has risen over 300% in the past year. The S&P 500 will be happy if it lasts a decade. What impact, if any, will the reset have on institutional adoption of cryptocurrencies and blockchain in the future – say, 2021? Zero, Dorman replied, adding: Institutional money does not come faster or slower depending on price changes. Those who try to turn around will still turn around, and they will. The recent drop in GBTC and COIN could be an indicator that this new money is already winding down, but not by the recent move down.
Blue ribbon for DeFi ?
Overall, the downturn may have increased interest in decentralised financial assets, Hougan told Cointelegraph. It was a great stress test for DeFi, and the industry took it in stride. This should increase confidence in the room. Dorman agrees that DeFi has passed a serious stress test, writing on his blog that it has performed exactly as expected, handling record volumes and liquidations with ease. Meanwhile, Gradwell told Cointelegraph: Ethereum clearly has a chance to beat Bitcoin if it can become greener and more useful than Bitcoin – for example, by moving to proof-of-stake and continuing to innovate in DeFi and NFT [non-playable tokens]. For his part, Moya said Bitcoin and Ethereum will remain two preferred assets for many institutions, even though the growth potential of the latter seems greater. Does this mean growth in altcoins relative to BTC? Ultimately, it comes down to different institutional interests, Ong said. While BTC continues to build on its image as an inflation hedge and expensive store of value, ETH and DeFi will in turn attract equity type investors.
Wedt on theGeneration
Can we talk about the lessons learned from the recent market turmoil? For investors who have not experienced a bear market for cryptocurrencies in the past, this was a great test, Hogan said. If the downturn was too stressful, it’s because you invested too much of your portfolio in cryptocurrencies. You need to get your position back. The recent decline in cryptocurrencies shows that the volatility of cryptocurrencies can be tolerated by retail and institutional investors, Moya added. Traders seemed ready to buy more bitcoins even as the decline continued in the $20,000 to $25,000 range. Related: Inflation is heating up as bitcoin’s ballast on balance sheets proves its worth. People will be more cautious, especially those with too much debt, Ong predicts. This was a revelation for newcomers, as extreme volatility levels are unique to the cryptocurrency markets. In general, recent volatility should not be an impediment to institutions adopting cryptocurrencies. The institutional investors I speak with see cryptocurrencies as a 10-year position with significant growth potential, Hogan told Cointelegraph. You know it’s a fleeting possession. They are betting on generation and are not deterred by volatility in a few weeks.The bitcoin saga has been a roller coaster ride for early adopters and investors, as it has plummeted from $19,500 in November 2013 to a low of $2,000 in December 2017. Many in the space have thrown in the towel, but some have been steadfast, holding on to their bitcoin for the long haul. Institutions, from hedge funds to hedge funds, are increasingly using bitcoin to hedge their portfolios and meet their goals.. Read more about bitcoin institutional investors list and let us know what you think.
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