Bitcoin remains hesitant, as data shows that this recent rally was driven mostly by futures, whilst spot has been selling. We know this because the aggregated CVD (Cumulative Volume Data) for spot has been stagnant whilst the CVD for futures has increased. This suggests that this price rise was driven by speculation or hedging rather than genuine demand.
One in five (22%) of Bitcoin traders who trade at least $1,000 a month in the cryptocurrency expect the level of volatility in the price of Bitcoin to increase dramatically in 2022, and further 57% say it will increase slightly. Only 18% expect it to fall or stay the same, according to a study from GNY, a blockchain based machine learning business.
Blame the Bitcoin Whales
The two main reasons for an increase in price volatility identified by those traders interviewed by GNY was Bitcoin Whales – they hold large proportions of the total outstanding float of Bitcoin – and traders expect them to increase their holdings and become more influential – this is the view of 49% of those surveyed.
The same number said that increased developments around the tax treatment of Bitcoin and other cryptocurrencies in 2022 will lead to a rise in volatility.
Some 38% said they expect more security breaches and as these are more openly disclosed, this will increase volatility; while 38% said volatility will also be fuelled by more big companies buying Bitcoin and talking about their holdings. Nearly one in three (29%) said they expect more regulatory news from around the world to increase price volatility in cryptocurrencies in 2022.
Cosmas Wong, CEO GNY said: “2021 saw some huge fluctuations in the price of Bitcoin and other cryptocurrencies, and our study suggests that 2022 will see a rise in levels of volatility. This presents a huge opportunity for traders to improve their returns, but they are also at greater risk of suffering losses. They need to make more use of trading tools that for example help predict future price movements.”
More financial institutions are entering the crypto space
More major financial institutions are entering the space as DBS, the largest bank in Southeast Asia by assets, which is planning to launch cryptocurrency trading services for retail clients this year.
DBS initially launched a crypto trading service for institutional investors in 2021. The CEO Piyush Gupta said during the bank’s earning call on Monday, “what we will focus on in the first half, the first two quarters, of this year is to make the access to digital assets a lot more convenient. He elaborated: “Today, what happens is that you’ve got 24/7, but the customers still need to call and speak to bankers. So the first order is to make it all online, make it self-service, make it instant, and make sure the internal processes are robust to be able to support that.”
In addition, Fidelity, the world’s fourth largest asset manager, have launched an ETP (Exchange Traded Product) in Europe. This will have a fee of 0.75%, making it Europe’s cheapest Bitcoin ETF.
Even though the US has only accepted a Bitcoin ETF linked to futures, Europe and Canada have been far more permissive. The product will be settled like shares and people will be able to buy it on stock exchanges in Frankfurt and Switzerland. Being able to buy crypto from traditional finance systems, like DBS and Fidelity, who are familiar to the general public, is a great step towards mainstream adoption.