On Wednesday, after a multi-week sell-off that saw crypto assets toss and turn non-stop, investors in this market found some much-needed reprieve. In the span of 12 hours, Bitcoin surged past $3,800, establishing a five-day high at $4,375 on the back of an aggressive influx of buying pressure. And with this move, which saw the aggregate value of all crypto assets move towards $140 billion, optimists claim that a bull run, or a recovery at the very least, is in this market’s grasp.
As Bitcoin breached $4,200, a supposed level of resistance, naive investors clamored to figure out if the worst is truly behind the cryptocurrency industry. Aiming to offer his conjectures on the matter, Michael Bucella, a partner at crypto-focused investment firm BlockTower Capital, made a guest appearance on CNBC Fast Money, a segment that has covered cryptocurrencies incessantly in recent weeks.
— CNBC's Fast Money (@CNBCFastMoney) November 28, 2018
Bitcoin Has One Leg Lower To Go
Noting that crypto’s bear cycle isn’t as perilous as it seems, Bucella, a former executive at Goldman Sachs‘ Canada arm, drew attention to his theory regarding the interplay between “strong hands” and “weak hands,” the two overarching brands of cryptocurrency investors. The BlockTower partner noted that while it would be accurate to assume that weak hands, better known as speculators, are liquidating their holdings to diehards, the latter group isn’t rushing to on-ramp fiat.
He explained that crypto’s recent liquidity dry spell, along with market volatility, can be chalked up to the hesitance from strong hands to bulk-buy Bitcoin. Although this statement may seem bearish in and of itself, Bucella added that crypto’s near-year-long “distress cycle” is presumably coming to its culmination, echoing analysts’ cries that the bottom is almost in.
The BlockTower representative, referencing Bitcoin’s historical price action, went on to point out that the last leg of crypto bear markets are normally the most volatile, yet short-lived. And while he was reluctant to forecast the level that Bitcoin will bottom at, Bucella explained that when digital assets bottom, whether it be at $2,000, $3,000, or otherwise, viable buying opportunities will be scant.
The Smartest Money Is Moving Into Crypto
Citing the strategies of investment savants, like traditional equity legend Howard Marks, the cryptocurrency advocate noted that while waiting for Bitcoin’s last bout of capitulation would be wise, $4,200/coin remains a bargain deal from a multi-year investment standpoint. And as such, Bucella stated that the “smartest money is [still] moving in.”
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Expanding on what he meant by “smartest money,” Bucella drew attention to the notable amounts of interest that MIT, Harvard, Stanford, and Yale have endowed onto cryptocurrencies and the firms maintain this ecosystem. While CNBC anchor Mellisa Lee did draw attention to the fact that these investments aren’t directly in crypto assets, the Fast Money guest noted that these plays are bullish nonetheless, as the aforementioned endowments are directly bolstering crypto-centric infrastructure ventures.
Speaking on institutional adoption specifically, the recent industry entrant noted that for global macro funds, many of which are headed by traditionalists, investing in Bitcoin may be a dicey decision, as the world first’s digital asset has only been through one long-term cycle.
Still, while he didn’t seem comfortable admitting that risk-off financial entities aren’t ready to foray into Bitcoin, his comments regarding smart money’s entrance into cryptocurrency markets isn’t a comment that should be ignored. And, as seen by TD Ameritrade’s, Fidelity’s, and the Intercontinental Exchange’s ventures in crypto and blockchain technologies, the smart money is likely preparing for the impending opening of the floodgates.
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