Fidelity Points to Bitcoin’s ‘Underlying Bullish Trends’ Amidst A ‘Healthy Phase of Consolidation’

Tom Jessop, the President of Fidelity Digital Assets, painted a very positive outlook for cryptocurrencies as he pointed out that the recent sell activity is healthy consolidation.

On Thursday, the price of Bitcoin dropped under $30k, which has Wall Street bearish. Still, Jessop gives the historical context of Bitcoin's quadrupling in value before this pullback to argue that “this is a healthy phase of consolidation for the market.”

“This market is still very much in its adolescence; it's hard to attribute price activity to specific factors,” said Jessop on CNBC's “Squawk Alley.”

But there has been “some underlying bullish trends on the network where investors are moving coin off-exchange, typically what you see is investors move coin on exchange as a precursor to selling, so I think this is some just some healthy profit-taking and some consolidation,” he added.

Not to mention, the company’s clients “have been steady net buyers throughout this entire period, and we continue to see strong demand among institutions for access to the asset class.”

Personal Motives

Jessop’s bullish comments are opposite of Scott Minerd, CIO of Guggenheim, who said Bitcoin has topped out “for the next year or so” and the digital asset may make a “full retracement back toward the 20,000 level.”

However, Minerd actively trying to talk down Bitcoin’s price makes sense given that “Minerd is looking to, but has yet to execute on, allocating 10% of his portfolio into bitcoin. So even though he seems like an upstanding guy, there's certainly room to question his motives,” wrote Mati Greenspan.

However, if we look at motives, even Jessop has reason to be positive as “Fidelity has positioned itself to be a major institutional on-ramp for Bitcoin,” Greenspan said.

Guggenheim has $270 billion under management. Everybody listens to them. Its CIO saying bitcoin should be worth $400K and later saying it should drop to $20K and stay there is the equivalent of an influencer pumping & dumping a microcap. These things do have a short-term impact.

— Alex Krüger (@krugermacro) January 22, 2021

However, Jessop isn’t ruling out an 80% decline either but did say that “we're in a very different market” than 2017, which was primarily driven by retail, while this time, we're seeing a much broader user base.

Crypto Regulation under Biden administration

The cryptocurrency market is particularly positive on cryptocurrency regulation under the Biden administration, and so is Jessop, which has ex-CFTC Chairman Alex Gensler leading contender for the SEC Chairman position, who has experience in the cryptocurrency space.

“I think it paints a more generally constructive attitude or picture in terms of what we might expect going forward,” said Jessop.

He further noted the “fairly interesting and good regulatory developments” over last year, including OCC giving guidance to banks around access to the asset class or even participating in some of these networks. Also, more recently and perhaps less publicized one is comment requests from the SEC around better definition around what it means to be a custodian and broker-dealer in the space.

As for Treasury Secretary Janet Yellen warning about terrorism risk, Jessop pointed to the recent Chainalysis report that shows only 0.34% of all crypto transaction volume is involved in criminal activity.

Although a valid concern, it is essentially smaller than what people suggest and also declining on a yearly basis, not to mention the non-digital economy is where this activity is occurring with greater frequency, and in greater size, he said.