One of the biggest hurdles that Bitcoin (and the entire cryptocurrency market) has faced is adoption from what is called ‘traditional money.’ Traditional money is money that comes from individuals and organizations that you would typically associate with the world of finance: stockbrokers, financial advisors, options traders, and retirement planners. One of the significant barriers of higher valuations for Bitcoin comes from the fact that many forms of ‘traditional’ money have been unable to participate in a market that is, as of yet, still unregulated. But things have been changing – and they had been evolving ever since Bitcoin’s all-time high in December 2017. There’s a phrase about the 2018 cryptocurrency bear market that says: “The only thing bearish about Bitcoin in 2018 was the price.” That is because while prices dropped, institutional participation in Bitcoin started to increase and has been growing for over two years.
Bitcoin Derivatives Launch DatesInvestopedia recently wrote an article reporting on the launch of the CME’s (Chicago Mercantile Exchange) launch of Bitcoin Futures Options on January 16th, 2020. What is extremely interesting about this event is that the start of the CME Bitcoin Futures Options contract did not coincide with a drop in the spot market – Bitcoin rallied and has continued to surge since the announcement. Why is this a big deal? Because the past two big news announcements of the launch of a Bitcoin derivative has coincided with significant breakdowns in Bitcoin’s spot price. The first occurred exactly on Bitcoin’s all-time high on December 17th, 2020, when the CBOE (Chicago Board Options Exchange) launched the first regulated Bitcoin Options contract. The CBOE Options launch saw Bitcoin fall almost -50%. The next significant drop occurred when Bakkt officially launched its Bitcoin Futures on September 23rd, 2019. The Bakkt Futures launch saw Bitcoin drop -23% in that week, creating the single most significant weekly loss since the November 2018 market crash. Contrast that with the recent official launch of the CME Futures Options on January 16th – Bitcoin rallied from a low of 8041.95 to a high of 9194.99, a +14.34% gain.
Global Stock Market CapsRegardless of the price action that has occurred with the launch of Bitcoin derivatives on regulated markets, we should notice a trend happening: big money is and has been involved in Bitcoin. Just last year, one of the largest money management companies in the world, Fidelity, opened up its cryptocurrency arm to institutional investors. CNBC now reports that Fidelity is targeting the European market. Couple that with the frequent applications of traditional money applying for a Bitcoin ETF with the United States’ SEC, we can see that there is a clear field of money about to pour into this market. How much money? Trillions. In the US alone, equity markets were valued at around $31 trillion in 2018. That’s almost half of the entire global stock market capitalization (44.35%). When, not if the US’s SEC finally approves the first Bitcoin ETF for the stock market, trillions of professionally managed money will be available to invest in Bitcoin. Right now, the majority of Bitcoin’s market is made up of a few well-capitalized early adopters and millions of retail investors. Imagine what will happen with trillions of dollars with professional money comes from hundreds of thousands of professional money managers around the globe.