Major financial firms could be offering cryptocurrencies like bitcoin as investment options in the next six to eight months, according to a former fund manager turned crypto investor, Mike Novogratz.
Speaking at the Reuters Global 2018 Investment Outlook Summit, Novogratz, who is now a chief executive of Galaxy Investment Partners which bets of cryptocurrencies, thinks the turning point for bitcoin is coming soon.
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Novogratz predicts that a big financial firm could offer cryptocurrencies as investment options, in the next six months, though he declined to say which company it would be. He believes this will have big implications for the price of bitcoin.
He said:
The institutionalisation of this space is coming. It’s coming pretty quick. When it’s that easy, the price of bitcoin or Ethereum is going to go much higher. And that is a lot closer than people think.
Bitcoin volatility
One of the major criticisms of bitcoin is how volatile the cryptocurrency is. Last week, bitcoin hit a record high of $7,879.06 before facing a massive sell-off over the weekend. The currency started trading at $5,857.32 on Monday and has now risen to over $6,700.
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By GlobalDataEarlier this year, a research paper published by analysts at investment bank Morgan Stanley, said it’s the volatility that prevents practical use of bitcoin.
Morgan Stanley analysts said:
Most regulators and investors view cryptocurrencies more as assets than actual currencies. Their values are too volatile and too hard to actually use for payments for most to consider them currencies.
Our conversations with some merchants indicate that, while cryptocurrencies might actually be attractive for them to operate their business, they find that the cryptocurrencies are far too volatile to be used.
Former JP Morgan banker and founder of London-based cryptocurrency enabler CommerceBlock, Nicholas Gregory, says that bitcoin volatility is merely a “slideshow”.
Prices of digital currencies have been on a rollercoaster ride lately but this violent volatility is actually all a bit of a sideshow. The simple reason is that plenty of people hold billions of pounds worth of cryptocurrency right now at no risk.
That’s because they are using hedging or short positions to cover losses that might occur before they are able to convert their money into pounds and pence. This is common practice for businesses using traditional currencies and it’s no different for bitcoin or any other digital currency.
Bitcoin isn’t the only cryptocurrency with issues
Ether, the cryptocurrency backed up by the Ethereum blockchain, saw one of its popular wallets frozen last week. This incapacitated around $280m of crypto tokens.
Startups often use Ethereum for initial coin offerings (ICOs), a form of fundraising using ether tokens. One startup, challenger bank Fiinu, was going to raise money through an ICO last week before it was blocked.
Fiinu’s chief executive Marko Sjoblom told Verdict:
All the [pre-ICO] money has been blocked within this Ethereum problem at the moment. We are intending to return all the money to investors, 100 percent, but the trouble is right now all the assets are frozen.
Despite the setbacks, Sjoblom is positive about how cryptocurrencies will develop once they go mainstream.
“We are really in the infancy of major changes. In the next five to 10 years, we will see the opportunities and challenges of blockchain as a whole grow.”
