Crypto: Is This Crypto Winter Different? Key Observers Reevaluate Bitcoin
The current market downswing could be driven by institutional investors exiting positions, as crypto still presents too much risk for them.
Bitcoin market observers believe that the recent price slump may actually reflect the asset’s wider adoption by institutions, which still don’t see it as a risk-off asset.
It’s been rough out there for crypto in recent months. Since October, when Bitcoin’s price reached a high of over $120,000, BTC has been gradually sliding. In recent weeks, it dropped sharply, down over 25% on the month.
Amid the sell-off, market observers have been looking for explanations. Bitwise chief investment officer Matt Hougan attributed the fall to the notorious four-year cycles that have previously defined crypto market price swings.
Others, including one US Federal Reserve governor, claim that the recent price movements show that institutions are risk-averse and that Bitcoin itself hasn’t reached the status of digital gold — yet.
Institutional interest in Bitcoin and crypto could be one reason for the recent sell-off. While major financial institutions have lots of money to pour into the crypto market, their appetite for risk is much lower than retail investors, and Bitcoin is still broadly seen as a risky asset.
Chris Waller, a governor of the United States Federal Reserve, spoke to this effect at a recent monetary policy conference on Monday. He said that much of the “euphoria” around crypto that accompanied the new administration of President Donald Trump is now fading.
These sentiments were echoed by Galaxy Digital CEO Mike Novogratz on Tuesday, who said in an interview with CNBC that the crypto industry has brought in “institutions where people have a different risk tolerance.”
Crypto asset manager Grayscale noted in a report that recent Bitcoin price action more closely correlates to software stocks with high enterprise values than to historically stable assets like gold. The investment company stated that short-term price movements have not been tightly correlated with gold or other precious metals.
Bloomberg commodity strategist Mike McGlone, also a noted Bitcoin bear, claimed that Bitcoin is still highly speculative. “[Bitcoin] has proven it’s neither digital gold nor leveraged beta,” he said, adding, “It’s a highly speculative [number]-on-the-screen tracking nothing with unlimited competition.”
Source: CoinTelegraph
