Famous fund manager Mohammed El-Erian talked about the recent events and future in Bitcoin.
Bitcoin on the whole has had a great year, thanks to a small number of dedicated believers who have enabled many individual investors to participate in this dazzling event.. After the value of Bitcoin plummeted by a third in a few days last week and Exchanges were struggling to cope with all investor activity, the market found itself at an important crossroads.. Either this drastic price correction will act as a catalyst for an increase in institutional investment, which has so far been quite limited in this market, or it will be a phase in the deflating of a significant and historic asset bubble.
Bitcoin, at the beginning of the year 1,000 dollar to a record high near 20,000 last week, bitcoin futures started trading on CBOE and CME, with specialized investment products passed several important milestones until its emergence. More importantly, these events have strengthened the growing appreciation for blockchain technology, which is the horizontal innovation behind bitcoin.. At least so far, with the exception of China, bitcoin has failed to bring about any government intervention and regulation based on traditional concerns of consumer protection, money laundering and other criminal activity, or even financial stability.
One thing, however, is missing. No significant erosion has occurred in the continued highly fragmented investor base, as the latest data from the US Commodity Futures Trading Commission shows.. “Long positions”, that is, those who take bitcoin for either investment or trading, are largely individual (retail) investors, while “short positions”, that is, those who sell with the expectation that they will close their positions profitably at a lower price, are the more professional part of market participants.. Meanwhile, large institutional investors (such as traditional mutual funds, Wall Street banks, and established hedge funds) are often on hold, although their involvement is key to bitcoin’s sustainability.
One of the busiest weeks in bitcoin’s short history. The most important question it faces is whether the recent price correction will be what market participants consider “healthy”.. The soundness of this fix will quench the overzealous irrational enthusiasm, attract institutional investors, encourage the development of market-deepening products, and broaden and stabilize the investor base and product offering. It will help the universe to take deeper structural roots, reduce the possibility of tighter regulatory response and reduce the threat of a collapse in prices.. Without these, even the strong loyalty of true believers will not be enough to protect the individual retail investor who will end this experience of price surges and crashes that could compete with the biggest investment bubbles in history.
Source : BloombergHT
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