Noelle Acheson is a veteran of company analysis and member of CoinDesk’s product team.
The following article originally appeared in Institutional Crypto by CoinDesk, a newsletter for the institutional market, with news and views on crypto infrastructure delivered every Tuesday. Sign up here.
You would be forgiven for thinking that the crypto winter seems to have passed the institutional crypto sector by.
Readers of CoinDesk will have noticed how the list of launches, funding rounds and affiliations is getting longer, and the number of links to news, profiles, papers and analysis of sector fundamentals is growing by the week.
Indeed, recent funding and M&A activity – not to mention the well-backed crypto platforms waiting in the wings – indicate a robust interest in laying the groundwork for broader attention from traditional institutions.
And last year we heard a lot about the “institutional wall of money” that was poised to flood the market as soon as custody got fixed, certain ETFs got listed, regulators got specific and I-forget-what-else was satisfied.
Yet, assuming that institutional investment is not driven by the same sentiment that is keeping this crypto winter cold would be a mistake.
Made of people
Underlying most institutional investors is an individual – a pensioner, fund holder, saver or insurance policy owner. In other words, institutional investors are largely driven by retail sentiment.
If their clients are not interested in crypto investment, it’s unlikely that they will be.
True, institutions march to a different set of rules than retail investors. And assurance from regulators that they will not be subject to punitive fines will perhaps encourage them to channel some discretionary funds into this new asset class.
It is also true that most retail investors look to the supposedly better-informed institutions for advice on where to get higher returns than the average. Professional investors have access to more detailed information plus the wisdom of experience, which in theory gives them an edge over individuals when it comes to recommending risky bets.
However, this overlooks social incentives. The public nature of their fund performance means that the risk is not just financial – notable or consistent underperformance will cause their clients to take their money elsewhere. Losses are painful for all, but retail investors can disguise them when chatting with friends, or even brag about them as a commiseration ploy. Institutional investors don’t have that luxury.
This tends to make most institutions even more risk-averse than their clients, which makes them even more sensitive to market moods.
So, expecting institutional investment to defy the prevailing chill and pour investment into the market as soon as the infrastructure is ready is unrealistic.
Laying the groundwork
On the other hand, fundamentals are improving.
Scalability is progressing, use cases are evolving, collective brain power is growing exponentially and regulators around the world are getting their heads around how to protect investors without killing innovation.
The crypto winter has been harsh for many, but it has given startups and incumbents a welcome respite from the market spotlight. Less pressure means more time to build.
While a more complete infrastructure may not be sufficient to get institutions involved, it is necessary, and its growth and increasing maturity will help many institutions to see crypto as less risky. Greater comfort and familiarity with the sector will encourage firms to listen when enough of their clients indicate a change in market mood by asking about crypto opportunities.
What’s more, overall market conditions – not just in crypto – could augur a shift in sentiment. Professional investors know the well-established theory called “Dogs of the Dow”: the worst-performing stocks of the previous period stand a good chance of shining in the next one.
While almost all asset classes performed badly in 2018, crypto’s rout was particularly spectacular. Does that qualify it for consideration under the “Dogs of the Dow” theory? Or does it mean that funds have an even wider range than usual of traditional dogs from which to choose?
Speaking of dogs, another factor to consider is that institutional investors, more so than retail users, tend to move as a pack (obviously with notable exceptions). While each thinks of itself as an outlier and (hopefully) smarter than the rest, the truth is that few are brave enough to go against market sentiment.
This means that the “wall of institutional money” that we hear about may actually be a thing, however elusive.
Nevertheless, the growing interest in crypto investment on the part of both traditional institutions and focused market participants – even in a bear market – is a sign that sentiment will turn at some stage.
What the trigger will be, nobody really knows – it could be new regulation, a liquid product or some comforting names adding their market heft to the trend. Or something else that we cannot yet foresee.
It could end up being something as simple as a change in the season. The cold cleanses the surface and hardens the strong, and as any gardening enthusiast knows, plants use the winter for cellular housekeeping. Many need a cold snap to activate the process that will bring spectacular flowers in the spring.
Which will come, eventually. As Hal Borland wrote: “No winter lasts forever; no spring skips its turn.”
Top 3 Price Prediction Bitcoin, Ripple, Ethereum: Bullish levels to watch after Binance announces Venus vs. Facebook’s Libra
- Cryptocurrencies have been rising as a new week kicks off.
- Binance has revealed its project Venus rivaling Facebook’s Libra.
- Here are the next levels to watch according to the Confluence Detector.
Cryptocurrencies have been advancing once again, with Bitcoin topping $10,500, Ethereum clawing its way back above $200, and Ripple extending its gains. Investors are jumping back into digital coins after a weak that saw struggles.
One of the upside drivers is Binance. The crypto exchange that also backs its own coin – BNB – has revealed a new project called Venus which aims to develop localized stablecoins all over the world.
Binance has said that it is well-positioned thanks to its public blockchain technology – Binance Chain – and its formidable status as one of the leading exchanges. Similar to Facebook, the crypto-exchange aims to work with corporations, tech companies, governments, and other players in the crypto-world. It aims to compete with the social media behemoth by launching a stable coin on a global scale.
The fresh news joins the announcement by Rakuten – a Japanese retail giant and the shirt-sponsor of FC Barcelona to compete with Binance and others by launching its crypto-exchange. Facilitating the entry of mainstream Japanese into the crypto-world is also bullish news for coins.
What levels should we watch?
This is what the Crypto Confluence Detector shows in its latest update:
BTC/USD needs to break resistance at $10,800
Bitcoin has one clear hurdle at $10,800, which is the convergence of the Fibonacci 61.8% one-week, the Simple Moving Average 50-one-day, the SMA 5-15m, the previous 4h-high, the Pivot Point one-day R2, and more.
If the granddaddy of cryptos breaks higher, the next cap is only at $11,640, which is the meeting point of last week’s high and the Fibonacci 61.8% one-month.
BTC/USD has support at $10,528, where the previous daily high, the BB 15min-Middle, and the SMA 200-4h all converge.
The next cushion is at $10,306, where we note the confluence of the BB 4h-Middle, the SMA 200-15m, the SMA 50-1h, the SMA 10-4h, the Fibonacci 38.2% one-day, and the previous 4h-low.
ETH/USD break confirmation awaited
Ethereum is trading above $200, which is not only a round number but also a dense cluster of lines including the BB 1h-Upper, the Fibonacci 61.8% one-week, the previous 1h-low, the PP 1d-R1, and the SMA 5-15m.
If Vitalik Buterin’s brainchild’s break is confirmed, the next noteworthy cap is $210, where we see the Pivot Point one-week R1 and the SMA 100-4h converge.
Further up, ETH/USD may find resistance at $217 where the previous weekly high meets the PP 1d-R3.
Strong support below $200 awaits at $192 where we see the confluence of the BB 1h-Lower, the Fibonacci 38.2% one-day, the SMA 10-4h, and other lines meet.
XRP/USD finally looking upbeat
Ripple, which was the laggard for many months, is finally looking bullish. XRP/USD has surpassed $0.2846, which is the convergence of the SMA 10-1d, the previous monthly low, the SMA 100-15m, and the previous monthly low. The line now serves as support.
It is backed up $0.2816, where we find the confluence of the BB 1h-Lower, the Fibonacci 61.8% one-week, the SMA 200-1h, the SMA 50-4h, and the Fibonacci 38.2% one-day.
Looking up, XRP faces some resistance at $0.3000. The round number is the meeting point of the PP 1w-R1 and the BB 1d-Middle.
Further resistance awaits at $0.3156, where the Fibonacci 23.6% one-month awaits the price.
China Central Bank Crypto Can Cannabalize Alipay, WeChat Pay — Analyst
China’s answer to Facebook’s Libra digital currency could help the central bank attract business away from Alipay and WeChat Pay.
Speaking to mainstream media outlet the South China Morning Post (SCMP) on Aug. 19, Cindy Wang, an analyst at DBS Group Research, said Beijing could profit from the appeal of its state-issued digital currency to merchants.
Bringing back bank deposits
According to Wang, the two payment giants Alipay and WeChat Pay account for nine out of every ten transactions in China.
In addition, the digital currency could help limit capital outflows.
“Currently, banks are under pressure to retain their deposit base because, with the money market funds distributed by third-party payment providers like Alipay or Tencent, some of the idle money held in mobile payment accounts are leaked out of the banking system into the hands of fund managers,” she told the SCMP.
China’s central bank digital currency won’t compete with yuan
As Cointelegraph reported, China’s hurried digital token is reportedly ready for issuance, though it can’t be called a bonafide cryptocurrency. Under the auspices of its central bank, the People’s Bank of China (PBoC), preparations accelerated in the wake of Libra, which authorities identified as potential threat.
Revealing further details last week, Mu Changchun, PBoC deputy director, underscored the payment method would not seek to compete with the yuan, nor take over any of its existing functions.
“It can use existing resources to support and develop commercial banks and smoothly promote digital currency,” he said regarding its emission.
Crypto Wallet ZenGo Now Supports Facebook’s Libra Testnet
On Aug. 18, the developers of ZenGo, a non-custodial keyless cryptocurrency wallet solution, announced that their app now supports Facebook’s Libra testnet.
Experimenting with Libra
According to the announcement, now users “can send and receive Facebook’s new cryptocurrency, Libra, just like any other cryptocurrency in ZenGo.” The developers also noted that the “testnet funds don’t hold any real value and are only for testing purposes.” The post explains:
“If you would like to experiment with Libra, you can turn on Libra testnet from the Account tab in the wallet. Once you turn on the feature, make sure your wallet is backed up, and we’ll send you your first Libra. Facebook is developing its own wallet Calibra, but it’s not publicly available yet. When it does become available it will be a custodial wallet, meaning that Facebook will have full control over the funds stored in it. But that will not be the only option. That’s why we’re offering Libra in ZenGo a non-custodial that people will have the option to choose.”
Still in the testing phase
The team at ZenGo also warned that Libra’s testnet is still in the experimental phase. Therefore, it could be periodically reset for maintenance and upgrades, at which point “all the data on the network gets reset along with all transaction history and balances.”
Currently, ZenGo app is only available on the iOS platform. The wallet also allows users to buy Bitcoin, Ethereum and Binance Coin with their credit cards or Apple Pay.
As Cointelegraph previously reported, ZenGo wallet aims to eliminate the need for storing private keys by using a key-like solution that is distributed among multiple parties, rather than existing as one string of characters.
At the same time, David Marcus, the head of Calibra at Facebook, emphasized that Libra users will not have to put their trust in Facebook