Young investors keep the faith with crypto

Those investors who arrived recently to crypto investing are feeling anxious, especially if they bought in during 2021 when Bitcoin and Ethereum were reaching dizzy all time highs. Since then the market has dropped by around 50%. Market commentators worried that new retail investors might be lost forever because of this. Eben Burr, president of Toews Asset Management told Reuters, “If the market decline continues, it will become too painful and retail investors will bail.” However, that doesn’t appear to be the case, especially with the youngest retail investors.

According to Callie Cox, investment analyst at eToro in the USA, the current correction hasn’t deterred the younger investors: “We surveyed 1,000 investors across age groups in March, and 58% of investors ages 18–34 thought Bitcoin would present the best buying opportunity in crypto over the next three months.”

This is surprising, given that Glassnode reported that in May 40% of Bitcoin holders were underwater on their investments at a time when BTC was $33,800. So, are younger investors still as optimistic as they were in March? Bobby Zagotta, CEO of Bitstamp USA, said, “Retail traders between 35-45 years old decreased their crypto balances amid market volatility in the last few weeks. By contrast, our younger users seem to be more bullish and have chosen not to sell.” 

Younger people are more optimistic

Is this because younger people are generally more optimistic? A 2021 research study on crypto investors’ beliefs, found that “younger individuals with lower income are more optimistic about the future value of cryptocurrencies, as are late investors.” Cristina Guglielmetti, financial adviser and president of Future Perfect Planning discussed first-time retail investors with Cointelegraph, saying: “The clients I have who own cryptocurrency haven’t really sold their holdings from last year to this year. They’re looking at it more as an educational experience and not assigning an expected return per se. They’re expecting it to be speculative and very volatile.”

Another question on some minds is whether the market can attract new investors. Bobby Zagotta said, “Headlines might have you believe that there’s more volatility than there really is and that investors are fleeing when prices fluctuate. But, that’s not really happening.” Etoro’s Cox added that 42%  percent of investors surveyed by eToro in March said they don’t buy crypto because they simply don’t know enough about it: “But, the appetite for decentralization and digital transformation is still there, especially among younger investors.” She believes the reason for this is “younger investors naturally have higher risk appetites, and they’ve seemed willing to stomach these swings because of their longer-term optimism about the technology.” Ultimately, Cox says, “We haven’t seen investors abandon the crypto space en masse, but we have seen them become more selective of what crypto they buy.”

Coinbase creates ‘crypto native think tank’

In a bid to be on the inside track when it comes to shaping polices for digital assets, Coinbase, a leading cryptocurrency exchange, has created a “crypto native think tank “to help shape the global conversation around policies for digital assets,” Cointelegraph reports. The new think tank will also publish research on Web 3.0, in addition to crypto.

The policy research department is to be headed by Hermine Wong, its current Director of Policy. She previously served in the Division of Economic and Risk Analysis at the United States Securities and Exchange Commission (SEC) and before that worked at the Department of State.

At the same time Coinbase has formed a Coinbase Institute Advisory Board with academics across law and finance from top universities such as Harvard, MIT, Duke and John Hopkins. It also has an academic partnership with the University of Michigan, which will partner with Coinbase on an annual U.S. based survey measuring the adoption of cryptocurrencies, as well as sentiment towards them. Its first publication, a “Crypto and the Climate” report is published today, 19th May.  It looks into the energy use of proof-of-work blockchains like Bitcoin.

It has also released today its first monthly insight report into crypto markets, comparing market movements in crypto and traditional finance. The formation of the institute is another example of Coinbase aiming to influence the conversation around cryptocurrencies, something it has done in the past with the launch last May of a fact checking blog “to combat misinformation and mischaracterizations about Coinbase or crypto being shared in the world.”

Coinbase also spent over $1.3bn lobbying in 2021, and created a political action committee in February 2022, ahead of the November midterm elections in the USA.

Microstrategy’s rescue plan for BTC

When the Federal reserve is about to make a statement, especially about interest rate rises, the Bitcoin community shudders. We have just seen this on 4th May. Yet, today, 5th May brings us a market that is green from end-to-end, with some altcoins making double digit gains (Tron surged by 14%).

Data shows that on 3rd May BTC/USD bounced between support and resistance after hitting $37,600, but a bounceback above $39,000 came fast enough. Still, something special needs to happen to lift Bitcoin above $40,000 and get over the hurdle of resistance at $43,000.

For the moment it is staying rangebound as the markets prepare themselves for Fed-induced volatility. Bulls looked to history for comfort, pointing out that the start of the Fed’s previous cycle of key interest-rate hikes in 2015 proved a turning point for BTC price strength, culminating in the December 2017 all-time-high.

Popular trader and analyst, Rekt Capital, said, “BTC is now testing a multi-week resistance.” Rekt also said that if Bitcoin could break out from the daily chart following the uptick above $39,000 then the multi-week downtrend is over and BTC/USD will see an upside.

The Microstrategy strategy

Other voices have been predicting that BTC will fall into the $20,000-$30,000 zone. But one company has a plan to avert that disaster and is being quite vocal about its contingency plan should it look like this might happen. The company is Microstrategy, which has the world’s largest Bitcoin corporate treasury. It says it will simply buy more Bitcoin to prevent that from happening.

Phong Le, the firm’s president and chief financial officer, revealed the conditions under which it would receive a margin call on its Bitcoin-collateralized loan: “As far as where Bitcoin needs to fall, we took out the loan at a 25% LTV, the margin call occurs 50% LTV. So essentially, Bitcoin needs to cut in half or around $21,000 before we’d have a margin call.” He added, “That said, before it gets to 50%, we could contribute more Bitcoin to the collateral package, so it never gets there.” He also stated that the firm had no intention of selling any of its considerable BTC holdings, and it appears to be prepared to support the crypto asset should there be any dramatic market capitulation.

Big banks in the crypto space

It was inevitable that banks would be unable to resist entering the cryptocurrency space, and more of the biggest US banks are in it than you might think. So, who exactly is taking such a ‘risk’, as the US banking regulator put it?

It seems that Bank of New York Mellon was the first to enter the fray in February 2021 with its offer of holding, transferring and issuing Bitcoin for asset management clients. The clients will be able to store BTC and ETH in BNY Mellon wallets, which have been created in partnership with Fireblocks. The service hasn’t launched yet, but is expected this year.

Bancorp’s Bitcoin custody service went live in October 2021, with NYDIG, a Bitcoin company, acting as sub-custodian for the bank. And State Street Corp said in March this year that it intends to offer crypto custody services in partnership with infrastructure platform This, according to the bank, is subject to regulatory approval.

Deutsche Bank is planning to develop a service to hold and trade crypto for institutional investors, and has already completed a proof of concept, although it is keeping this move very quiet indeed. Similarly, BNP Paribas has also completed a proof of concept with wallet provider Curv. The plan is to develop a secure method to transfer tokenised securities.

Wealth Management Clients

Banks have been rushing to offer their wealth management clients exposure to crypto, starting back in 2021. Morgan Stanley is the pack leader, according to CNBC. It reported in March this year that Morgan Stanley is enabling access to three Bitcoin funds for clients with at least $2 million in assets held at the bank.

JPMorgan Chase is allowing its financial advisers to accept buy/sell orders for five crypto products from its wealth management clients, and Wells Fargo has been offering something similar since 2021. Indeed, both JPMorgan and Wells Fargo have registered private Bitcoin funds with NYDIG.

Citigroup now has a digital assets group, and Goldman Sachs is offering wealthy clients access to an Ethereum fund via Galaxy Digital.

Trading and Research

You will find the same names in trading. Goldman rebooted its crypto trading desk in March 2021, and in March this year became the first US bank to carry out an over-the-counter crypto trade in partnership with Galaxy Digital.

The big banks are also putting a lot of money into research, particularly Bank of America, Citicorp and Morgan Stanley, with all of them creating new departments and opening up new job roles.

And there you have it – big banks aren’t really as crypto-averse as you might have thought.