Interest in Crypto Market Still Heightened Despite The Deep Correction, It’s 2021 Not 2018
Appetite for crypto and DeFi remains “extraordinarily high” among high net worth individuals with “zero doubt” that the family offices and broader institutions continue to enter the space with the potential to have “more upside.”
Prices in the crypto market are down 35% to 99% from their all-time highs.
This has the market worried that the bull market is over but what’s interesting is the fact that interest in the space from the outsiders hasn’t diminished. Investors are still looking for ways to be a part of the sector that aims to revolutionize finance and steer the world towards decentralization. Trader and economist Alex Kruger noted,
“Seems as if everybody is raising or plans to raise a crypto fund these days. Appetite for crypto remains extraordinarily high among high net worth individuals. Interest in DeFi is off the charts. This is 2021, not 2018.”
“Zero Doubt” about Institutional Interest
Breanne Madigan, who left Goldman Sachs after 15 years to join crypto startup Blockchain.com in 2018 and is the newly appointed CEO of crypto firm TradeBlock, is also of the same opinion while being unfazed by the deep correction the market experienced recently. She said,
“I've seen this a few times now. I have zero doubt that the family offices and broader institutional investing community will 100% continue to be interested and to enter this space in increasing sizes this year and in future years.”
The crypto market, according to her, is still in “super early stages” compared to the traditional financial markets, and the deep retracement is just traders tending to have knee-jerk reactions to headlines.
“It's a complicated asset class, and there are certainly risks,” she said, adding, as the infrastructure improves, the volatility will subside, and we’ll see “more consistent investment that stays for the long term.”
Decentralized finance (DeFi) and non-fungible tokens (NFT) are two areas that Madigan thinks will continue to gain traction.
Crypto has “More Upside”
According to the $7.5 billion hedge fund, SkyBridge, investors seeking a currency alternative as global debt balloons should look to Bitcoin instead of gold that is expected to soar to fresh highs in the next year.
Both digital gold and gold are likely to rally even if the Federal Reserve moves to taper asset purchases, said Troy Gayeski, co-chief investment officer and senior portfolio manager at SkyBridge Capital.
“We’re going to stick to Bitcoin and crypto because we just think there’s more upside,” Gayeski said in an interview with Bloomberg. While there’s more volatility, “you’re going to capture a little bit more juice than you will in gold from that same phenomenon,” he added.
Since last year, the monetary support has pushed the Fed’s balance sheet to a record high while fiscal spending has boosted government debt. Both of these factors pose a risk to the dollar’s value which increases the appeal of alternatives. Gayeski said,
“All fiat-currency alternatives — which have all gone through fairly recent substantial corrections — are in a much better place now to handle that eventual taper and gradual slowing of money-supply growth than they were as they were making higher-highs after higher-highs.”
According to some like Citigroup, precious metal is “losing luster” to the cryptocurrency, while others like Goldman Sachs feel the two assets can coexist.
“New Highs” are Coming
The leading crypto asset is currently trading around $36k, down from its all-time high of nearly $65k in April. Meanwhile, gold which hit a record above $2,075 an ounce last year, is currently at $1,885 per ounce.
Bullion has now established a floor, said Gayeski, adding, despite the taper talk, the Fed is not going to start reducing its pace of purchases until 2022, which is bullish for risky assets, including BTC.
“Going forward, the probability of gold continuing an uptrend is fairly high, making new highs over the next year,” he said.
SkyBridge, a fund-of-funds manager, has a small exposure to a gold miner. The asset manager also offers a Bitcoin Fund, and its founder Anthony Scaramucci has teamed up with First Trust Advisors on a Bitcoin ETF.
Gayeski expects the Securities and Exchange Commission (SEC) to approve the product by the fourth quarter of 2021 or the first quarter of next year. Gayeski said,
“The mix of strategies in our broader portfolio is amplified by having a small but meaningful position in alternatives to fiat currencies like Bitcoin.”