Rick Rieder, BlackRock’s chief investment officer of global fixed income, told CNBC Wednesday that the investment giant has “started to dabble” in bitcoin—it’s the latest instance of a major financial player dipping its toes into digital assets.
Reider did not elaborate on BlackRock’s cryptocurrency strategy, but last month the investment giant filed documents with the Securities and Exchange Commission showing that it wants to include cash-settled Bitcoin futures as eligible investments for two of its funds.
BlackRock is the world’s largest asset manager—it managed some $8.7 trillion at the end of the fourth quarter.
Rieder told CNBC that he believes bitcoin’s recent rally is gaining momentum in part because of stronger regulations and better technology.
“My sense is the technology has evolved and the regulation has evolved to the point where a number of people find it should be part of the portfolio, so that’s what’s driving the price up,” he said.
$51,000. That’s the new record price bitcoin hit early on Wednesday morning. The most popular cryptocurrency started the year with prices around $30,000.
A spate of major corporations and financial institutions including MicroStrategy, BNY Mellon, and MasterCard,and PayPal have announced cryptocurrency initiatives this month, and there are reports that a $150 billion investment division at Morgan Stanley is considering investing in bitcoin. A portion of bitcoin’s recent gains are likely attributable to a surprise announcement from Tesla that the electric car maker had invested $1.5 billion into the cryptocurrency and has plans to start accepting it as payment.
Bitcoin prices extended their recent gains today, continuing to rally and breaking through the $15,000 level to hit a new high for this year.The world’s most prominent digital currency reached $15,306.84 at 11:15 a.m. EST on CoinDesk.
At this point, the cryptocurrency was up close to 10% over roughly the last 24 hours, additional CoinDesk figures reveal.The digital asset has been enjoying a great run this year, climbing more than 200% after falling below $4,000 back in March.
Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.
When explaining bitcoin’s latest price movements, analysts pointed to several variables, including uncertainty surrounding the U.S. election.
“Bitcoin has broken through the $15,000 mark,” causing it to reach a multi-year high, said Charles Hayter, cofounder and CEO of digital currency data platform CryptoCompare. Recommended For You
“The surge comes at a time when Europe enters its second lockdown, the dollar continues to weaken and stock markets are rallying on the back of the US presidential election.”John Todaro, director of institutional research for TradeBlock, pointed to similar variables when interpreting bitcoin’s latest gains.
“Equity markets have likewise risen alongside bitcoin as expectations of increased fiscal stimulus have risen—increased stimulus will devalue the dollar but push up equities and bitcoin as was expected in the event of a Biden win,” he stated.
Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, offered a different point of view, describing bullish sentiment as the main driver of the digital currency’s latest gains.
The Path To $20,000
Now that bitcoin has broken through $15,000, analysts have started eyeing the $20,000 price level, speculating on when the cryptocurrency will reach a fresh, all-time high.Denis Vinokourov, head of research for London-based digital asset firm Bequant, commented on this situation.
“Bitcoin continues to grind ever so higher and, while calls for a re-test of the all-time high continue to grow ever so louder, parabolic price runs are not necessarily what the market needs for growth to be sustainable,” he stated.
“A correction and capital rotation into mid and small-cap assets, at this stage, would prove healthy for the overall marketplace.”“However, given the aforementioned FOMO and growing demand from retail, most signs point to a further squeeze higher,” said Vinokourov.
“Thus, ultimately, all eyes are on the elusive $20,000 price level, with little price discovery data to note any key levels – resistance or otherwise.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS. Follow me on Twitter or LinkedIn.
I am a financial writer and editor with strong knowledge of asset markets and investing concepts. Currently, I serve as VP of Content for financial services firm Quantum Economics. I have worked for financial institutions including State Street, Moody’s Analytics and Citizens Commercial Banking. An author of more than 500 publications, my work has appeared in mediums such as New York Post, Washington Post, Fortune, CoinDesk and Investopedia. Previously, I created all the industrial finance training for a company with more than 300 people. I have spoken at industry events across the world and delivered speeches on financial literacy for Mensa and Boston Rotaract. I currently hold Bitcoin, Bitcoin Cash, Litecoin, Ether and EOS.
Bitcoin traders and investors have seen a return to volatility this month, with the bitcoin price suddenly dropping in early September.
The bitcoin price, which had broken $12,000 per bitcoin at the end of August, dropped to around $10,000 amid a broader market sell-off before somewhat rebounding.
This week, the bitcoin market is braced for almost half of nearly $2 billion worth of bitcoin options to expire—something that could bring a fresh wave of volatility.
Bitcoin open interest, effectively traders betting on what they expect the price of bitcoin to be, has climbed to $1.9 billion—around triple what it was just a few months ago, according to data from bitcoin and crypto analytics provider Skew, with some 47% of existing contracts due to expire this coming Friday.
The looming bitcoin options expiry could spark a fresh bout of price volatility. Previous large expiries have caused the market to “bounce quite aggressively,” according to some analysts.
When options expire, the trader that made the bet will either get a payout or lose their stake.
The bitcoin options market has swelled through 2020, led by Deribit, a Panama-based derivatives exchange, which accounts for the vast majority of the bitcoin options contracts.
Meanwhile, bitcoin market watchers have been buoyed recently by bitcoin’s bounce at the psychological $10,000 level.
“Bitcoin has resisted the bears’ pressure below $10,000, saving itself from falling further towards $9,000 and below,” Alex Kuptsikevich, the FxPro senior financial analyst, said via email, adding the market is seeing “growing interest from institutional investors after some stagnation.”
“It is worth paying attention to the reduced volatility in bitcoin in recent days, along with cautious price growth. This is more akin to careful buying following the optimism of global markets, rather than going all-in on the prevailing optimism.”
Elsewhere, markets are nervously eyeing what has been called a second wave of coronavirus infections, with U.S. stock market futures pointing to a muted start to the week.
I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported on how technology is changing business, political trends, and the latest culture and lifestyle. I have covered the rise of bitcoin and cryptocurrency since 2012 and have charted its emergence as a niche technology into the greatest threat to the established financial system the world has ever seen and the most important new technology since the internet itself. I have worked and written for CityAM, the Financial Times, and the New Statesman, amongst others. Follow me on Twitter @billybambrough or email me on billyATbillybambrough.com. Disclosure: I occasionally hold some small amount of bitcoin and other cryptocurrencies
Since last October there has been a growing debate as to whether bitcoin (and other cryptocurrencies by association) are safe havens or risky, speculative assets. The stress test of the coronavirus crisis has helped to clarify this.
During the past two months, bitcoin has moved in sync with the S&P 500, betraying the fact that it is a risky asset. Gold, typically seen as a safe haven, has also risen but that is likely a response to falling interest rates, huge liquidity injections from the Fed and other central banks, and the possibility of monetary debasement.
Fed liquidity boosts bitcoin futures trading
The recovery in bitcoin has come alongside the overly generous provision of liquidity by the Fed, and the worrying development is the explosion in open interest in bitcoin futures (up to three times the average of the last year).
This points to the risk that bitcoin has now become a speculative plaything (several large hedge funds have become active in the bitcoin market) in markets and is at risk of a correction should risk appetite change.
Underlying this, on longer horizon view, bitcoin has also tended to move in sync with equities, for instance the peak in bitcoin in December 2017 prefigured weakness in equities.
Still within the less ‘independent’ crypto currency community there is a view abroad that bitcoin and crypto currencies are a ‘safe haven’ in the same way people might for instance, regard gold. Recent behavior suggests this is not the case.
From the point of view of cryptocurrencies as assets, very basic data analysis suggests that optically bitcoin has a low correlation with safe havens like gold. This does not mean that bitcoin is a good diversifier or a safe haven. It has been highly volatile over the past two years and is subject to trading and liquidity risks not normally associated with safe havens.
A further clue as to the true nature of cryptocurrencies as investable assets comes from the community of people who hold and trade them. The micro-structure (or plumbing) of markets, as well as the anthropology and sociology of those who populate them (which will have to be the subject of a future missive) is crucial to the way they behave and subsequently to their risk characteristics. Note that the current spike in bitcoin futures trading coincides with a huge spike in Robinhood account trading and in retail buying of call options.
Bitcoin futures activity explodes
Though admittedly not scientific, nor thorough, I suspect that many bitcoin traders also trade equity futures and currencies and use the same equity trading rules (technical) to buy and sell bitcoin (cryptos now have their own rating system, FCAS). If this generalization holds, it suggests that risk budgeting may drive a positive correlation between cryptocurrencies and equities, especially at market highs and lows.
Another observation is that for its size (the top ten cryptocurrencies barely add up to the market cap of JPMorgan JPM ) the crypto market attracts an inordinately large amount of attention, which may draw money in at high points. To my mind this points to bitcoin having a pro-cyclical bias in terms of its riskiness as a trading asset.
On a structural basis the coronavirus crisis may create greater interest in cryptocurrencies – especially given how the crisis have underlined the role of the digital economy and how higher taxes will be required to pay for the stimulus programs enacted.
However, the disarray surrounding Facebook’s Libra project is a sign of the operating and regulatory complexities facing cryptocurrencies. More powerful still is the incentive that central banks and fiscal authorities around the world have for the bitcoin not to succeed. Witness as an example the vigour with which the Chinese – who tightly control money flows – have clamped down on cryptocurrency exchanges.
Madness of crowds
The next steps in the crypto or digital currency (they are almost the same in that crypto currencies are digital currencies that use cryptography) industry for central banks to issue their own coins, and for the digital payments industry. More thorough regulation, cleaner cross-border payment processes and more reliable identification mechanisms will be part of the workload of central banks and governments.
In the short-run, keep an eye on the growing number of speculators in the bitcoin market – financial history shows that when new assets attract crowds, it invariably ends badly.
I am the author of a book called The Levelling which points to what’s next after globalization and puts forward constructive ideas as to how an increasingly fractured world can develop in a positive and constructive way. The book mixes economics, history, politics, finance and geopolitics. Markets are the best place to watch and test the way the world evolves. Most of my career has been spent in investment management, the last 12 years at Credit Suisse where I was the chief investment officer in the International Wealth Management Division. I started my career as an academic, at Oxford and Princeton.
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