In Search Of A Bearish Trigger

A large asset manager has decided to offer Bitcoin trading to its institutional investors. Bitcoin shot up around the announcement but reversed course and erased most of the move up. The currency has stayed subdued since. This could mean that the market is getting boring. It could also mean that investors and traders are taking a breather before a more decisive move.

Traditional asset managers are not necessarily averse to Bitcoin. It turns out that Fidelity Investments, one of the largest asset managers in the world, is interested in providing hedge funds with access to the Bitcoin market. In an article on the Wall Street Journal website, we read:

Fidelity Investments said it will store and trade bitcoin for hedge funds and other professional investors, becoming one of the first Wall Street giants to step into this volatile corner of the financial world.

(…)

The new business Fidelity announced Monday, Fidelity Digital Asset Services LLC, will allow money managers, family offices and other institutional clients to trade bitcoin and ether, another digital currency. It intends to expand into additional assets in the future, said Tom Jessop, Fidelity’s head of corporate business development.

The firm, for now, has no plans to extend the trading of bitcoin to retail customers, Mr. Jessop said. The business has about 100 employees, including dedicated client-services representatives, he said. It is currently setting up accounts for some new clients and will open more broadly early next year. Fidelity plans to execute trades through several digital-currency exchanges and platforms.

This is good news for institutional investors willing to trade in Bitcoin as the options to do so have so far been limited. On the surface, this doesn’t seem like that interesting for individual investors. But appearances can be deceptive. In particular, it might just be the case that the institutional interest in Bitcoin is considerable or at least considerable enough for substantial new funds to enter the market. We have seen some indications of that in the past. If this is true, then the launch of Bitcoin trading by Fidelity might pour new capital into the market and drive the prices higher.

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