The calls for Bitcoin to rise to six digit prices have fallen silent as the world’s most valuable crypto has hit a losing streak. Finally, after months of destruction the digital currency got a bounce Friday. After rising above USD 8,000 in early morning trading, by the afternoon it was back to USD 7,873 per digital coin.
2018 has been a terrible year for the crypto space overall. Former market darlings of the crypto space last year have been effectively put out to pasture. One of the first and most prolific crypto miner to go public last year was TSX-V listed HIVE Blockchain. HIVE has acted as a bellwether for junior crypto stocks and has fallen from an all-time high of C$6.75 late last year, to a low on April 10th of C$1.07. Its shares rebounded 3.7% to $1.40 per share Friday.
Crypto Bust 1.0 Takes Shape
Hut 8 Mining Corp. is another crypto miner that saw its shares spike, only to have those gains turn into losses. Its shares traded to the $5 mark, but today, closed at just C$3.63.
The operations in these crypto mining hopefuls have not changed. However, the value of the underlying commodities, cryptos, are facing a very uncertain future.
Most governments and regulatory agencies ignored the entire crypto space until its moonshot last year. As it matures serious players are now looking at cryptos under a microscope. Every major economy has moved to regulate the crypto space, and some governments and megabanks have banned the crypto trade altogether.
Money center banks in the west, like Citi and J.P. Morgan, have prohibited their clients from engaging in transactions with crypto exchanges. China, which was a former hotbed for crypto development, has banned them outright.
These sorts of actions have weighed on the sector as a whole; and, as governments move toward much tighter oversight, the future value of the first generation of cryptos is in doubt.
Big Money May Be Coming Into Crypto Space
One factor that is giving hope to crypto bulls is the recently announced interest in the space by major financial players like the Rothschild Family and George Soros.
The acting head of Soros Fund Management has reportedly received internal approval to invest in cryptos, though to date he has not taken on a position in the market. This comes just months after Mr. Soros called cryptocurrencies a “speculation”, though it is unknown if he meant it in a derogatory sense.
Venrock, an investment vehicle of the ultra-wealthy Rothschild family, has cemented an agreement with Brooklyn, NY, based crypto investment fund Coinfund. The nature of the investment has not been detailed publicly, but a ranking member of Venrock has confirmed that the Rothschild family is interested in entering the Blockchain space, specifically.
Commentators in the cryptocurrency sphere are seeing these developments as bullish for the existing crop of popular cryptos, like Bitcoin and Ethereum. In reality, these well-connected investors may or may not be interested in ownership of crypto assets that offer no yield.
New Issues Hit Crypto Space
The past year has seen numerous Initial Coin Offerings, many of which create underlying value for the platform they created.
Unlike Bitcoin that offers little more than a speculative vehicle that can be used to settle transactions, new platforms like Spacechain, Superset and VideoCoin add a new component to investing in the crypto space. All have unique business models that could change the way people do business.
Most people are familiar with the wildly popular Telegram ICO’s, which offers owners tokens that can be used on a successful communication platform. Spacechain launched the world’s first Blockchain node into orbit, while Superset and VideoCoin offer new ways for people to use Blockchain based systems to create value.
As Jake Brukhman, co-founder of Venrock, said after its investment in Coinfund was announced,
“We’re trying to cultivate a unique synergy between teams as we see more experienced founders and more traditional tech startups taking up Blockchain.”
It is far more likely that Rothschild’s capital is going to flow into productive assets that can do something that people value, instead of the cryptos themselves. Like the capitalists who made the big money in every gold rush, mining the miners usually proves more profitable than mining the actual gold.