More Institutions, More Investors, More Users
What are the indicators that this new Bitcoin bull market may be stronger and longer-lasting than the last one, which peaked near the end of 2017?
Institutional Money and Infrastructure
The benefits of institutional money coming into the Bitcoin market have been predicted for some time, and it’s actually happening now. What needed to happen first was the building of technical infrastructure and related services, so that institutional investors would be comfortable putting significant amount of capital into Bitcoin and other cryptocurrencies.
Bakkt — To The Futures
Bakkt is the Bitcoin futures project being created by the Intercontinental Exchange (ICE), the parent company of the NYSE. Bakkt has received $182.5 million in venture funding to date, and plans to launch their first futures products on July 22.
Last December 31, Bakkt CEO Kelly Loeffler wrote:
“I am pleased to confirm that we have completed our first round of funding of $182.5 million from 12 partners and investors who, like us, believe in the future of digital assets.
The partners and investors in the first round include Boston Consulting Group, CMT Digital, Eagle Seven, Galaxy Digital, Goldfinch Partners, Alan Howard, Horizons Ventures, Intercontinental Exchange, Microsoft’s venture capital arm, M12, Pantera Capital, PayU, the fintech arm of Naspers, and Protocol Ventures. Our work today is centered on driving institutional access for digital assets, along with merchant and consumer uses, and we’re already expanding on this vision, collaborating with great companies like Starbucks in these efforts.”
Also pertinent to note that Bakkt CEO Kelly Loeffler is married to Jeff Sprecher, the Founder and CEO of Intercontinental Exchange and Chairman of the New York Stock Exchange. The point being that Intercontinental Exchange seems to be very much all in on the Bakkt project.
Jeff Sprecher, Intercontinental Exchange chairman and CEO, with his wife Kelly Loeffler, an ICE executive who will be CEO of the startup Bakkt, on the trading floor of the NYSE on July 9, 2018. Gillian Laub for Fortune
And why is the Bakkt Launch a big deal in terms of this new Bitcoin bull market?
“In a blog post that likened Bakkt’s launch to the Apollo 11 moon landing, chief operating officer Adam White wrote Thursday that the platform will “initiate user acceptance testing” for its bitcoin futures contracts, which will be listed and traded by its parent company. Bakkt announced last month that it would begin testing in July, though it did not provide a specific date at the time.
Both contracts will see a minimum price fluctuation of $2.50 per bitcoin (with each contract containing one bitcoin). Trades may be executed at $0.01 per bitcoin, with a listing cycle that can last for as long as 12 months (for the monthly contract) or 70 consecutive eligible contract dates (for the daily contract).
Final settlement for both contracts will be at the Bakkt Warehouse.
Stepping back, ICE announced last year that it would be launching physically-settled bitcoin futures contracts. Unlike cash-settled contracts, such as what CME Group offers, customers receive an actual bitcoin on the contract’s expiration, and not the fiat equivalent to bitcoin’s price.
On Thursday, White wrote that Bakkt’s mission is “ to support the development of trusted infrastructure for securely transacting in the new market for digital assets.”
“This is no small step,” White wrote Thursday. “This launch will usher in a new standard for accessing crypto markets.”
“Compared to other markets, institutional participation in crypto remains constrained due to limitations like market infrastructure and regulatory certainty. This results in lower trading volumes, liquidity, and price transparency than more established markets like ICE’s Brent Crude futures contract, which has earned global trust in setting the world’s price of crude oil.”
Coinbase Custody — Close To $2 Billion AUC (Assets Under Custody) From Institutional Cryptocurrency Customers
“Coinbase’s grand plan of drawing in $10 billion of Wall Street money into crypto and Bitcoin has just hit a major milestone, the exchange says.
One of the world’s leading exchanges, Coinbase has stated that its institutional cryptocurrency storage solution, Coinbase Custody has hit $1.3 billion in assets under custody, with $2 billion expected soon.”
“Only institutional investors with at least $10 million in deposits have access to Coinbase Custody.n Currently, the platform is supporting a total of 27 cryptocurrencies. Additionally, the company reported that 0% of the company’s clients are based within the US.”
1 Million Active Bitcoin Addresses
From Off The Chain the investor newsletter of Anthony Pompliano, founder and partner at Morgan Creek Digital:
“And finally the most important fundamental metric in all of Bitcoin — daily active addresses. On Saturday, the Bitcoin network saw more than 1,000,000 active addresses participate in a transaction in a single 24 hour period. This level of activity hasn’t been seen since November 2017 during the height of the last bull market.
In my opinion, daily active addresses is the most important data point in Bitcoin because it shows how many unique network participants (with known exchange wallets removed) are transacting the decentralized digital currency. “
The Halving — May 2020
What is a Bitcoin Halving event?
“[A] U.S. venture capitalist has praised bitcoin’s “exciting” progression in recent months and years but warned the market is heading for a “supply shock” thanks to next year’s closely watched bitcoin halvening event, now just 342 days away.
“What I think might be happening is an anticipation of a coming supply shock in 2020,” Alyse Killeen, managing partner of StillMark Capital told Bloomberg, a financial newswire. “In 2020 we’ll have just half the daily supply of bitcoin that we do now.”
“While we’re looking ahead to this supply shock and halvening event, we’re also seeing greater demand for bitcoin and new on-ramps for more familiar and conventional sources. There’s the anticipation that there will be a broader group of users and consumers who have an appetite for bitcoin,” Killeen said. “
So why is the current Bitcoin bull market a much bigger deal than the one that peaked with Bitcoin just over $20,000 in December, 2017? Because, per the items above, along with continuously unfolding industry news along the same lines, Bitcoin is growing in market cap steadily, and is being supported by both institutional and retail investors with more consistency over time, than has ever been the case, to date.
Also, historically, strong Bitcoin price surges have begun fairly shortly after a Bitcoin halving, whereas this one is taking place long after not only a post-halving bull run, but was also followed by a significant bear market for most of 2018, and into 2019, until roughly the beginning of May, this year.
Since that time, Bitcoin’s price has increase from roughly $5,400 on May 1, to over $9,200 as of this writing.
The reason this is important is that this bull run is taking place prior to next year’s halving in May 2020, which has even more potentially positive ramifications for Bitcoin’s price, after the next halving takes place.
And for anyone reading with more of an altcoin (cryptocurrencies and tokens other than Bitcoin) focus, than a Bitcoin focus — as Bitcoin goes, so goes the entire cryptocurrency market. And it appears this trend will continue for the foreseeable future.
This is largely due to Bitcoin’s unprecedented market share, which, as of this writing, currently comprises 57.2% of public cryptocurrency markets.
Doug Sandlin is a performance optimization consultant for startups, blockchain projects and digital asset projects and investors. For more information, please visit https://dougsandlin.com