Bitcoin is in its worst bear market since 2014…
The world’s largest cryptocurrency has dropped nearly 85% since trading at an all-time high near $20,000 in December 2017.
But that crash isn’t scaring everyone away… The world’s second-largest stock exchange still plans to launch bitcoin futures contracts early next year.
According to recent reports, Nasdaq is still working with regulators to introduce new crypto products by the first quarter of 2019, despite the weak crypto market over the past year.
Nasdaq will join the world’s largest exchange operator and owner of the New York Stock Exchange (NYSE)—which will launch its own physically delivered bitcoin futures exchange on January 24, 2019.
Whether you’re a crypto skeptic or believer, this is bullish news for cryptocurrencies over the long term.
It bears repeating: The world’s two largest stock exchanges are still on board with bitcoin—despite its recent crash.
Nasdaq and the NYSE didn’t become the top two global exchanges by offering products their clients didn’t want, either. Their institutional clients are demanding crypto products. Otherwise, they wouldn’t put their money and reputations on the line.
Nasdaq and the Intercontinental Exchange (ICE, the owner of the NYSE) are laying the groundwork for institutions to make crypto investments.
When these institutions enter, they won’t just send a trickle of money into this market… they’ll send a flood. And that will be great news for all crypto holders.
But there’s another important thing institutional investors will give bitcoin: a true measure of its value. More on that in a moment…
For years, the crypto space has been like the Wild West. There have been few—if any—regulations on crypto assets… and little or no protections for investors, either. Regulated exchanges will change that by bringing transparency to the crypto market. And that transparency will lead to real price discovery of the value of bitcoin.
Price discovery is the process of determining the proper price of an asset through the interactions of buyers and sellers.
Let me explain…
The value of the entire cryptocurrency market is about $110 billion. That’s tiny compared to other asset classes. For instance, the global stock market is $50 trillion—or 450 times greater than the crypto market.
Because it’s relatively small, the crypto market is easier to manipulate.
I’ve heard stories about some unscrupulous people sending bitcoin back and forth to each other at slightly higher prices. That gives the appearance of increased volume.
When unsuspecting traders start piling in, the perpetrators unload their huge stakes for big profits. Those who are late to the game are left holding the bag.
To be clear, manipulation happens in all types of markets—including the stock market.
Now, it’s nearly impossible to manipulate large, liquid stocks of companies like Apple and Amazon.
But it’s easier for crooked actors to manipulate small-cap stocks. They just need to spread a rumor to pump up the stock. And when other investors pile in, they dump their shares for big profits.
These new crypto exchanges will greatly reduce manipulation of crypto prices by allowing supply and demand to meet in a regulated environment. And that will bring asset prices closer to their true value.
So for the first time, we’ll have actual price discovery in bitcoin. And here’s why that’s important…
Removing a Roadblock to Institutional Buying
In July 2018, the Securities and Exchange Commission (SEC) denied the Winklevoss twins’ application for a bitcoin exchange-traded fund (ETF). (The Winklevoss brothers are best known as early investors in Facebook.)
The SEC said the proposed ETF failed to satisfy the requirements of the Exchange Act—specifically, “the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.”
The SEC won’t be able to use that rationale to block a bitcoin ETF once ICE and Nasdaq launch their exchanges.
Once these exchanges are up and running next year, we’ll have regulated and trustworthy market mechanisms to tell us the actual worth of bitcoin.
In 2019, we’ll finally discover the true price of bitcoin. And we think it’ll be much higher than it is now.
That’s why you want to own cryptos before institutions get into the ICE and Nasdaq platforms—and before the average investor can buy a bitcoin ETF. If you believe that this will happen like we do, use the pullback to buy some bitcoin now.
Just remember, cryptos are volatile. So keep your positions sizes small. You don’t need to bet much for the potential of life-changing gains.
Analyst, The Palm Beach Daily
P.S. The launch of two regulated crypto exchanges will boost the prices of cryptocurrencies in 2019. But most people don’t know that there’s another way to make money from cryptos.
You see, some crypto projects pay “dividends.” That way, you can generate crypto income no matter what the market does. Here’s the thing: As the value of these crypto projects increases, so do their payouts.
World-renowned cryptocurrency expert Teeka Tiwari has unearthed 10 opportunities in this niche of the crypto market. To learn more, click here to get his 2019 crypto forecast… and the details about his bold, new venture.
Readers ask PBRG analyst Greg Wilson if there are other ways to pay little or no fees on bitcoin purchases…
From Tamara D.: Hi, Greg. I read your article on investment and crypto trading fees, and I had a few comments. Of course, I hate paying fees. So I use the Robinhood app because it doesn’t charge any fees. The problem with Robinhood is that there’s no way to transfer crypto to a wallet. So it seems my funds are locked in its system. Will there ever be a fiat-to-bitcoin method, so we can skip all this nonsense?
From Shane P.: Greg, I’m curious as to why you didn’t mention Robinhood as a way to purchase cryptos without fees. According to its website, it doesn’t charge commission on purchases.
Greg’s Reply: Tamara, you hit the nail on the head. With Robinhood, you can’t transfer your cryptocurrencies from its application to another exchange. So you don’t truly own your cryptos the way you would if you control your private keys. That diminishes your flexibility.
There’s also the question of whether Robinhood is really “free.” We haven’t compared Robinhood prices to those of other available options. But bitcoin prices can vary, depending on the exchange.
For example, bitcoin may trade at $3,550 on an exchange with no fees… but $3,500 on an exchange with a 1% fee. The total cost of bitcoin on the exchange with the fee would be only $3,535 ($3,500 plus a $35 transaction fee), which is actually lower than the exchange with no transaction fee.
In this case, you’d get a better price paying the transaction fee because a spread is built into the bitcoin price on the exchange with no fee.
For now, the best option is to use maker orders on Coinbase Pro. And make sure to transfer your holdings to a wallet in which you control the private keys.