A Bitcoin price drop will trigger a surge in institutional investment, driving up the price permanently.
The observation from Nigel Green, chief executive and founder of deVere Group, comes after the world’s largest cryptocurrency, which is up nearly 500% since the rally started in October, has pulled back after hitting all-time price highs earlier this month of more than $61,000.
Mr Green says: “Bitcoin has been on an epic rally since last October. Almost week-on-week, the price has been smashing through barrier after barrier, reaching new highs.
“This momentum came as investors are looking for alternatives to traditional currencies as central banks and governments continue to helicopter new cash into economies, as Wall Street giants increasingly pursue crypto activities, and as billionaire entrepreneurs such as Tesla’s Elon Musk and Twitter’s Jack Dorsey pile into the cryptocurrency, amongst other factors.
“This has all spiked the hype in the media and massive interest amongst retail investors, who are keener than ever to invest in digital currencies, dubbed ‘the future of money’.”
He continues: “However, this momentum currently appears to be slowing down, with Bitcoin’s recent consolidation sitting around $55,000.
“The current slow-down, together with greater ongoing regulatory scrutiny, can be expected to prompt the herd-like mentality of many inexperienced investors who will now cash-out their Bitcoin, forcing the price temporarily lower.
“And this is when institutional investors, many of whom are just beginning to dip their toe in the crypto water, will likely dive in. They will employ the ‘buy the dip’ mantra.
“With them, they will bring their enormous capital, clout and expertise to the market, and this will then prove to be another considerable confidence shot for even more retail investors.”
Mr Green goes on to add: “As such, I believe this temporary Bitcoin price slowdown could trigger a surge in institutional investment, leading to prices going up permanently.”
Last month a deVere Group global poll found that 70% of those Baby Boomers and Gen X respondents are already invested in digital currencies or are planning to do so this year.
At the time, Nigel Green said: “Baby boomers and Gen X, who own most of the world’s wealth, are embracing the cryptocurrency revolution. This will serve to further bolster prices in the market in the longer-term.”
The deVere CEO – who predicted the figure and the timing of Bitcoin hitting its all-time high this month – concludes: “It’s likely that institutional investors are waiting for prices to dip a little further and are poised to significantly increase their exposure to crypto when they do.
“Should this happen, as we expect it will, we know that this will drive prices upwards.”