Institutional interest in Bitcoin and other cryptocurrencies is rising, but how can crypto traders get data and analytics to capture market-moving sentiment?
- Following a surge in the appeal of cryptocurrencies with retail investors, institutions are now entering the fray.
- Our survey reveals that one-third of institutions are thinking about trading cryptocurrencies.
- We launch a version of MarketPsych indices to help crypto traders capture market-moving sentiment and themes.
Cryptocurrencies shot to prominence in 2009 with the launch of Bitcoin as relief against major central banks’ quantitative easing and the fear that traditional currencies would be impaired.
The supply of Bitcoin is managed by its generation program, which causes the market to believe in its rarity, and therefore prevents over-generation of each individual coin — or algorithm — that functions as a digital currency investment for the buyer.
Another attraction of cryptocurrencies is that they are traded on the blockchain ledger, which is difficult to hack, prevents a user selling one Bitcoin unit multiple times, and allows for anonymous transactions.
Rise and fall of Bitcoin
The boom in the cryptocurrency market is partly due to the increase in Bitcoin’s competitors, leading to 1,500 different cryptos being available worldwide.
It’s also due to the successes of investors who backed Bitcoin from the beginning.
The anonymity of blockchain technology attracts users, as they can process transactions without being tracked.
The second generation of crypto investors is looking to the fresher digital assets and initial coin offerings (ICOs), and moving away from Bitcoin for their investments.
Bitcoin’s price gained more than 1,300 per cent last year as investors piled in, but since peaking at close to US$20,000 in December it has lost more than half of its value.
Although cryptocurrencies have predominately attracted retail investors, platform providers are preparing for institutional investors in a market that is experiencing low volatility, and its investors are finding it harder to achieve alpha.
Backers are also hoping that the recent launch of Bitcoin futures will confer greater legitimacy on the volatile cryptocurrency and lead to its wider use.
Regulators are in a long-standing debate as to how they can best monitor and regulate the popular asset class.
It is becoming a pressing matter of when digital currencies will be monitored, what the best process of monitoring them is, and how best to protect investors from fraud and hacks.
The recent Coincheck hack, where US$532.6 million was stolen from the Japanese cryptocurrency exchange, has brought security and investor protection to the forefront of concerns for regulators and potential future investors alike.
Not all markets recognize cryptocurrencies as a legal means of payment, or require them to be registered with the local financial authority.
However, regulators are now looking to crack down on these assets to determine traders’ identities, ensure exchanges have stronger risk management systems, and encourage users to trade on centralized exchanges.
Our crypto traders survey
According to our survey, almost a third of participants are thinking about trading cryptocurrencies. Out of those planning on trading, nearly 70 percent are looking to trade within the next six months.
The frontrunner for consideration is Bitcoin, closely followed by Ethereum, Ripple and Litecoin, showing that firms are not just interested in Bitcoin alone. Over a quarter of respondents have suggested alternative, less popular assets.
Other than actually trading cryptocurrencies, firms want data and data analysis explaining the state of the market, current rates, popularity and current values, as well as the latest news on global crypto activity.
Some respondents are looking for all equities data that would apply to cryptocurrencies and information on ICO introductions or allocations.
Tracking cryptocurrency sentiment
The boom in prices of cryptocurrencies has spurred a huge online industry where individuals exchange trading ideas in forums and news websites report on the latest developments in the industry.
News and social media are now driving the investment and risk management process more than ever.
That’s why a new version of the MarketPsych Indices now includes its first sentiment data feed for Bitcoin.
This is in addition to new and/or enhanced market sentiment data for several asset classes, new user capabilities, and additional coverage.
It will scan over 400 news and social media sites — many specific to cryptocurrencies — to capture market-moving sentiment and themes to help investors looking for an edge in trading Bitcoin.
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