The crypto market has undergone a rapid change as market prices surge amidst a string of good news coming in from all angles. Some countries are on the way to implementing crypto-friendly regulation, big names like Amazon and Microsoft are allocating sizeable resources to encourage development, and institutional investment is showing signs of growth.
In the middle of this apparent bull run and growing acceptance of cryptocurrencies, we asked Livio Weng, Karen Chen, and Weirong Chen about their thoughts on how the market has been developing, and the near future of cryptocurrencies. Livio Weng is the CEO of Huobi Global, Karen Chen the co-founder and CEO of Coinsuper, and Weirong Chen a senior analyst at TokenInsight. Their answers provide some insight into the asset class from an insider perspective.
1. Do you agree with the likes of Tom Lee, who said a “fair price” of Bitcoin would be about $14,000? What in your opinion is the fair price of Bitcoin, is it currently undervalued?
Weirong Chen, TokenInsight: Predicting the specific price of Bitcoin is actually very challenging. The digital currency industry is still in its early stage. Bitcoin is currently the most successful application of blockchain technology, but Bitcoin will not be the only successful application. If the industry is promising, Bitcoin will certainly have room to rise in the future.
2. Do you believe that the institutional investors already got here (into crypto) via OTC and stablecoins?
Livio Weng, Huobi Global: Huobi has been seeing a lot of institutional traders entering the space over the past year, but I don’t think the critical tipping point has quite happened yet. While we’re seeing many institutional players with a strong appetite for digital assets, we’ve also found that many simply aren’t comfortable dealing in unregulated markets. It will be very interesting to see what happens over this year and next, as more and more regulators bring cryptocurrency under their jurisdictions.
Karen Chen, Coinsuper: We’ve experienced first-hand lots of “crypto”-focused institutional players, such as market-makers and token funds, trade OTC with us – especially a significant amount of stablecoins flow. However, we’d reckon that traditional institutions such as asset managers, hedge funds, family offices, and other traditional outfits aren’t quite in yet (by directly owning crypto). But rather they are closely monitoring crypto markets, or they are invested via “equity” into crypto and fintech-related businesses. It may really take a massive burst of Bitcoin to $8k+/10k+ levels to get traditional institutions having an appetite for direct Bitcoin/crypto ownership. This is because we believe at these levels Bitcoin is re-surging and proven not to be on the path towards death/”zero.” There are two key factors affecting their decisions too: 1. the efficiency and liquidity of the market; 2. regulatory environment, particularly for those asset managers, banks, endowments who are holding regulatory licenses.
Weirong Chen, TokenInsight: TokenInsight believes that the digital currency industry is gradually becoming more accepted. If institutional investors want to enter the market on a large scale, regulation is the primary issue. In areas such as the United States where digital currency regulation is relatively friendly, there have been infrastructure arrangements for participants to serve institutional investors, such as compliant exchanges, digital brokerages, custody, and more.
3. Many people predict another recession might soon occur as the stocks, S&P 500 keep reaching new ATH’s, and US debt rises to insane levels. Do you think people will try to hedge in Bitcoin/crypto, or will the majority turn into gold and other commodities?
Karen Chen, Coinsuper: With a total market cap of around US$250Bn, Bitcoin/crypto is not yet a hedging against other financial assets by scale. Historically, we’ve observed Bitcoin price is relatively more correlated to USD index and daily policy index. Gold currently has a market cap close to $8 Trillion. Hypothetically, if/when Bitcoin’s market capitalization grows to the size of gold’s, 1 BTC will be worth $300k-400k USD (more than 75x from this very point). Currently, Bitcoin/crypto is treated as an investment by people who understand or have got the relevant risk appetite. Millennials will potentially drive this shift from traditional gold to “digital gold,” Bitcoin.This inverse possibility presents tremendous upside and disruption.
Weirong Chen, TokenInsight: Bitcoin has a yield of more than 200% in the past three years, which is higher than the income of assets such as S&P 500 and gold. In addition to its high-yield characteristics, Bitcoin has characteristics that are related to other assets. This allows investors to add Bitcoin to their portfolios to increase their return on assets. Although the current Bitcoin trading volume is less than 1/100 of the S&P500, its rapid growth indicates that the market’s acceptance of Bitcoin is also increasing.
4. Ripple’s CEO comments on 2,000 crypto projects we have now in the space: “Most of them, the vast vast majority [of cryptocurrencies] are going to go away, and it’s because a lot of them were created with either an unclear use case or a use case that hasn’t proven out. And you already see that to some degree because there is no liquidity. Ultimately in the digital asset space, liquidity is critical to success.” – Do you agree that the purge is yet to come? Yes/No, Why?
Weirong Chen: TokenInsight also believes that most of the current digital currencies will go away, and ultimately it will be a valuable digital asset.
5. What in your opinion will most likely trigger the next bull run?
Livio Weng, Huobi Global:: No one can predict with 100% certainty what will spark the next bull run in crypto. From my perspective, though, there are a number of promising possibilities. First, as I mentioned before, we’re seeing more and more governments officially regulate and recognize cryptocurrency. If enough do this over the next year or so, it could generate a critical mass in public confidence and generate a new boom. Big players like Facebook as well as JPMorgan entering the market could also have a big impact on things. Finally, major institutional players moving into crypto trading could also shake things up. Fidelity has just announced that it will soon be doing exactly this. Robinhood and E*Trade are also moving in this direction. It will be interesting to see what the reaction is to this.
Weirong Chen: We believe that if the blockchain projects have a major breakthrough in technology and bring more landing applications, the industry can develop at a high speed, thus opening up a new growth cycle.
The positive sentiment here is undeniable, and there’s a lot to look forward for investors in the market. This sentiment is tempered with some realism, but these individuals see a strong future for the Bitcoin and the digital assets market – perhaps 2019 is the breakthrough year for cryptocurrencies, after all.