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Why The Price of Bitcoin Doesn’t Matter

The price of Bitcoin dropped a further 10% today adding to the previous ten it has lost since November 14. This motion catches the eye but it is not surprising. Most technical analysis predicted it would happen if Bitcoin did not find support at the $5,400 price level, which now seems to be the case. Now all indicators point to further down movement to the next resistance line at $4,800.  However, while this price decline  is worrisome for retail traders, these news do not dissuade institutional investors. To them, price swings simply do not matter. This is because venture capital investors and institutions are into crypto for the long run.

In an interview, Gabor Gurbacks, director of VanEck told Cointelegraph that “institutional investors are more focused on proper market structure than short term price fluctuations.” His opinion is that institutional investors are more concerned with developing proper digital asset valuation, custody, and market protections.

Valuation

Since the beginning it has been a challenge to find a proper value for Bitcoin. Many struggle to assign any form of intrinsic value to cryptocurrencies. In the conventional market propiatery pricing systems determine the value of assets. For example, the S&P 500 measures the values of stocks by taking the sum of the adjusted market capitalization of all S&P 500 stocks and then dividing it with an index divisor developed by Standard & Poor’s. However, given the volatility and price manipulation in an unregulated market, this sytem would not work.

Custody

The development of secure storage of crypto currencies tops the list of any future market securitization. The prevailing losses to hacks, glitches, and scams are not an option for institutionalized markets. And thus, all potential custodians like Bakkt, Bank of America, Morgan Stanley, and others are working feverishly towards building  super secure storage systems.

Market Protection

The final component to the future crypto infrastructure is Regulation. All other components are meaningless without the backing of digital assets by the government. In this the SEC will play a vital role in creating, defining, and enforcing crypto-specific regulation. Regulation will safeguard major investments and funding from malicious players such as manipulators, scammers, and hackers. This process is already underway.  The SEC is clearing the playing field by targetting all ICOs, exchanges, and executives seen as offering, trading, or marketting securities. Using a system called “Guidance by Enforcement”, it is almost declaring all ICOs as securities. This will bring the entire crypto market activities under its regulatory control.

Analysis

Price volatility is part of the natural state of Bitcoin. By definition, decentralization allows for market chaos created by individual participation and adjustments. Experienced investors know to ride the wave and take advantage of price swings. But insinstitutional money is not here to hussle in the peaks and valleys. They see crypto as new asset class and their goal is to take over and control it. They are pouring billions of dollars in building the foundation of a future financial regime controlled by the usual players – the banks. Therefore, their strategy is long term; and so long as crypto development stays a course that satisfies their interest, current prices really don’t matter.

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