Cryptocurrencies are at the beginning stage of a long-term upward trend
Most money managers remain wary about investing in cryptocurrency, even though some big-name investors have placed their money on digital coins.
Only a limited amount of money has flowed in as institutions are still in the early stage of adopting cryptocurrency.
At present, we are kind of at the bottom of that curve, which could accelerate to the ”upside”. That applies not just to individuals but institutions as well. In particular, a source of significant assets is pension funds. Up till now, these have not been primarily deployed to cryptocurrencies.
At least 1 in 2 of the world’s largest banks are exposed to cryptocurrencies. That could be either through direct or indirect investments in projects associated with blockchain and digital currencies. On the other hand, the more conservative wealth managers, such as those in local and state pension funds, have mostly remained on the sidelines. Their concerns about regulatory uncertainty and volatility in price have clouded the industry.
Two Virginia public pension funds, earlier in this month, had declared they were looking to obtain approval to invest $50 million in a fund that purchases cryptocurrency derivatives and digital tokens. They have become one of a few pension funds to announce publicly they are investing in cryptocurrencies.
Once we arrive at that stage, we could observe a positive influence due to tighter spreads that leads to less volatility. The charts and the technical indicators show the cryptocurrencies are minding support resistance levels. So, we can put in place risk management strategies that deal with short-term swings and expected volatility. We do this by identifying key levels and combining them with indicators measuring aspects such as overbought oversold readings, and momentum.
Retail traders have been increasingly adopting cryptocurrencies. This rate has accelerated, largely due to the COVID-19 pandemic. The price of bitcoin alone has increased nearly 500%, from March 2020. Platforms such as Paypal, Coinbase, and Robinhood have made it easy for investors to purchase digital coins. That has also caused an increase in exposure. The University of Chicago conducted a study recently. It found 24% of Americans invested in stocks while 13% traded in cryptocurrencies in 12 months.
We will likely see a long-term uptrend in cryptocurrencies that is regardless of adoption rates. We can observe support in the market as the cryptocurrency assets have held on to key resistance levels. This is in spite of fears around the Chinese property market and a recent sell-off triggered by China’s central bank banning all cryptocurrency transactions.
We notice Bitcoin tends to outperform when they are going lower together. Also, cryptocurrency assets tend to remain directionally in step. Though you would always get to see sources of underperformance and outperformance, you will observe that most cryptocurrencies are usually up or all down on the same day. That is something that we could depend upon.
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