Institutions May Pin Million-Dollar Tags on Bitcoin. That Doesn't Mean It's Going to Happen.
Rob Levy stated that institutional money won’t elevate crypto overnight. Still, the extreme demand for real Bitcoin ownership may justify major price targets.
- BTC’s record levels of open interest could trigger institutional adoption, but over-leveraging puts the market at risk.
- Demand for real commodities in other markets indicates that BTC derivatives alone won’t satisfy traders.
- Institutions are gearing up to place $1 million targets on Bitcoin.
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Bitcoin price targets in the crypto market are a dime a dozen, and the motivation behind those targets can be dubious.
Levy was an options trader with the CBOE during the dot com boom before founding Hxro, which now sees over $2 million in daily volume. Speaking to Crypto Briefing, Levy pointed out that the Bitcoin options and derivatives markets are booming and that the influx of institutional money can lead to precarious market scenarios.
“In theory, deep derivatives markets like futures and options are supposed to improve liquidity in general. It happens over time though, it’s not just a silver bullet,” cautioned Levy.
Levy pointed to the 15% BTC price drop on Jan. 10 as an example of over-leveraging, causing $2.9 billion in liquidations, with Black Thursday being another infamous example.
However, institutions are market makers that add vital liquidity. “Liquidity is basically oxygen for any market,” stated Levy, adding that “a market without liquidity makes it difficult to manage risk.”
Bitcoin: More Than Digital Gold
Levy discussed the recent $146,000 Bitcoin price target set by JPMorgan earlier this month, based on Bitcoin and gold’s comparative analysis.
“Younger generations don’t really think about gold as a store of value,” says Levy, pointing out that even demand for gold jewelry is plunging among millennials. According to Levy, this raises the question of whether Bitcoin will stop at the market cap of gold or blow right past it.
“This is more than just digital gold. Bitcoin is one of the biggest technological advancements and overall changes that we’ll see in our lifetime, so it’s very difficult to put a price target on it,” he said, adding that “I do think that the gold comparison is the easiest one to make.”
Levy stated that $146,000 Bitcoin isn’t out of the question, adding that “there’s nothing stopping it” from moving from $40,000 to $400,000. Drawing on his experience trading agricultural commodity options, Levy said, adding that “supply is going to be the biggest issue.”
“For people who want to own physical bitcoin, it’s not good enough to own a futures contract somewhere, and there are plenty of people who want to own the real thing in their wallet,” said Levy. “So there could be a real supply crisis down the road, and that’s when all bets are off.”
As Levy pointed out to Crypto Briefing, the macro-economic situation in which society is currently embroiled creates the perfect conditions for Bitcoin to thrive.
Big US Banks have also taken an interest in Bitcoin.
A CitiBank analyst recently projected a Bitcoin price of $318k by the end of 2021, calling it “21st century gold”.
JP Morgan projects a Bitcoin price of $146,000 as it fights to capture gold's market share.
— Clay Finck (@Clay_Finck) January 14, 2021
“In a perfect storm scenario, $146,00 for JPMorgan price target, that’s not crazy to me. Let’s wait for the first real big institutions to put a half a million or a million-dollar price target on this thing,” said Levy. “Because I can tell you it’s coming. I’m not saying it’s going to trade there, but those sort of projections are coming.”
As a growing number of major institutional players express their interest in Bitcoin, it may just be a matter of time before Levy’s prediction comes to pass.