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Price Poor Metric to Judge Bitcoin, Says CoinShares

Digital asset management company CoinShare’s chief strategist Meltem Demirors featured on CNBC’s Fast Money on Monday, where she discussed the problematic nature of judging Bitcoin on price alone.

Demirors offered that actual utilization may be a better alternative metric for institutional and retail investors to consider, which she put down as the real struggle right now. Although she said that it is not yet clear when or how Bitcoin may regain its value, the best way to predict this is by determining solid metrics that best fit Bitcoin.

The strategist noted that ”real traction” is imminent but a lot is relying on analysis to find the key metrics that will drive growth.

She compared cryptocurrency with similar innovative enterprises such as Intel, Amazon, and Microsoft in the early days of internet stocks, noting that it took Amazon nine years to recover from its initial price high during the dotcom bubble, Intel 15 years, and Microsoft 17 years.

Such as these early internet stocks, Demirors said that the real traction for Bitcoin will come with time. The late 2017 price run can be put down to “fear of mission out” (FOMO), which caused a similar type of speculative bubble, she said. With that bubble burst, real businesses with real-life use applications are being developed in the space.

As she put it: “New technologies that shift the paradigm take a long time to really understand.”

This goes to what she described as a key issue right now in the lack of a coherent narrative from the cryptocurrency community. With institutional interest in the space growing, Demirors said that this could well be an opportune time for Bitcoin, but it is not being considered a store of value because of the poorly-relayed narrative.

Bitcoin (BTC) currently sits at USD 6,038.18 after struggling this year to make significant gains compared with last years highs of nearly USD 20,000.

 

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Zero Correlation Between Stock Market and Bitcoin Price According to Financial Research Expert

The Director of Research at Pension Partners, Charlie Bilello, has found zero correlation between the S&P stock market index and the price of Bitcoin in data stretching back to 2010. This debunks a popular theory that Bitcoin and the stock market were correlated since they both reached record highs near the beginning of 2018. Since May 2018 the stock market has been moving upwards while the Bitcoin market has gone downwards, totally opposite of the theory that Bitcoin and stocks move up and down together.

Bitcoin hit all-time highs near 20,000 USD per coin in December 2017. About a month later the S&P 500 Index, which is one of the most popular measures for stock market health in the United States, reached highs near 2,900 on 26 January 2018. The stock market and Bitcoin had both been rallying throughout the entirety of 2017, giving the impression that perhaps there was a positive correlation.

Further evidence towards a possible correlation is that the S&P 500 hit its lowest levels in 2018 so far on 8 February, about the exact same time as Bitcoin hit its lowest levels of the year so far at 6,000 USD. Perhaps there was a common cause for these market movements in early February 2018 since the synchronized timing of the minima in the stock market and Bitcoin market is quite striking.

When stepping back and looking at the longer term, there is clearly no relationship between stock movements and Bitcoin price. Bitcoin is down 60% since its peak in December 2017 while the S&P 500 is up 4% during the same time. Likewise, during the Bitcoin bear market from December 2013 through January 2015 Bitcoin fell 85% and the S&P 500 rose 12%.

A very important point that Charlie Billelo mentions is that correlation is meaningless without causation. Stock prices are tied to long-term corporate earnings, while Bitcoin price is influenced by entirely different factors since it is a decentralized currency.

A possible connection between stocks and Bitcoin is that Bitcoin can be a haven to store money when stocks are crashing. However, although institutional investment infrastructure and interest in cryptocurrency are ever increasing it is still a relatively small factor at this time. Perhaps when institutional investment infrastructure becomes more widespread, and the stock market crashes, then this mechanism will come into play and Bitcoin will go up while stocks go down.

In any case, if Bitcoin became a significant money haven during stock crashes then the Bitcoin market and stock market would have a negative correlation, which is opposite of the theory stemming from price movements in 2017 that the stock market and Bitcoin market have a positive correlation.

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Robinhood’s $363 Million Expansion to Rival Coinbase

The free stock trading app, Robinhood, announced on Thursday that it has raised USD 363 million in a new investment round, reports Fortune.

This makes the company the second most valuable private fintech startup in the US after online payments company Stripe, valuing it at USD 5.6 billion. Fortune reports that Robinhood has shown an ability to rapidly overtake incumbents in one of the oldest Wall Street industries after its valuation has quadrupled in the last year.

Growth has largely been driven by new product launches and commission-free trading. The new funding will allow the company to expand its workforce from barely 200 employees, and hire more experienced executives and technical talent.

Baiju Bhatt, Robinhood’s co-founder, explained why the company experienced such a rapid rise in after only three years of operation:

“I think the real ‘X factor’ that made investors even more excited about being a part of Robinhood was seeing our ability to, with a very, very limited workforce, to ship three brand new products in these last six months, while maintaining and growing one of the largest brokerages in the US”

Robinhood Crypto, which launched in February, is expected to be rolled out throughout the US by the end of 2018 and could become a viable challenge to US giant Coinbase, according to Bhatt. It is currently only available in 10 states around the US.

“We expect by the end of the year to be either the largest or one of the largest crypto platforms out there, but we also really feel we’ll have the absolute best experience for investing in crypto as well — from having a large variety of coins available to a more favorable cost structure — mainly no commissions — to just quality of product.”

Robinhood plans to bring on board other currencies in order to make the challenge to Coinbase, which lists only four cryptocurrencies on its exchange: Bitcoin, Bitcoin Cash, Ethereum and Litecoin. Robinhood currently only offers trading of Bitcoin and Ethereum, but also allows its users to track market data for 16 different cryptocurrencies, including Ripple and Zcash.

 

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