Analysts have maintained that interest in cryptocurrency isn’t dropping as may be feared by some within the industry.
The crypto market has had a largely bearish 2018. Top coins like Bitcoin and Ethereum have lost over 75 percent of their value since January. However, a group of analysts believes it would be premature to write off cryptocurrency.
According to analysts from Sanford c. Bernstein & Co., this year’s extensive bear run is nothing but a price correction. To them, many of the Bitcoin “obituaries” are simply exaggerations.
$4 billion revenue
The analysts point out to the huge profits and revenues that exchanges earn as evidence that interest in crypto is still intact.
The team of seasoned analysts believes that cryptocurrency hasn’t lost its allure if exchanges can get $4 billion in profits.
In addition, the leading digital asset, Bitcoin (BTC), has contributed $1.8 billion paid in fees to crypto exchanges. What does this indicate?
The Bernstein & Co. team argues that the above figures represent a market that is lively and where trading has only just picked up speed.
According to a report published in Bloomberg, the growing market and increased transactions bring in billions for exchanges.
The potential for massive growth
The cryptocurrency market has the potential to see massive growth in the future. At the moment, the industry is only a tiny fraction of the entire financial markets.
The digital currency market experiences little activity compared to other traditional instruments like treasuries, equities, and corporate debt. But the team at Bernstein &Co. believes that crypto is the “next big thing”, citing data that shows rising figures in trading activity.
Monthly trading volumes of the crypto market pale in comparison to monthly volumes of other assets. For example, the average intraday trading volume for cryptocurrencies is about $17 billion.
It is a far cry when compared to the $207 billion generated in the U.S. equity market. It does not come near that of the US Treasuries market.
Source: Bloomberg; Sanford C. Bernstein; CoinMarketCap, CBOE, Coindance, SIFMA
Even more significant is the fact that the entire crypto market has a market capitalization of $219 billion. This figure is not comparable to, say, the intraday trade volume of Europe’s equity market.
Yet something is changing and cryptocurrency remains on course for greater adoption. The analysts state that the cryptocurrency asset class is maturing and institutional demand has been building up for a while now.
“There are a plethora of opportunities for traditional firms, including custodians, asset management, and market-making services”
The majority of Wall Street is poised to make an entry into crypto, even if that grand entry delays due to regulatory concerns.
Signs that things are moving into the next phase come from Goldman Sachs and Barclays. The two banking giants support crypto via their bitcoin trading desks.
Many other banks are looking to venture into custodial services. It is a move that would see them make profits from fees without getting exposed to the vagaries of cryptocurrency.
The Bernstein report, however, points out that we are unlikely to see a rush of conventional investors into the market. Regulatory concerns remain, forcing many players to keep off.