As Aug. 3 dawned, bitcoin bulls were fretful.
“Bitcoin bulls defend $7,450 but need progress soon,” was the headline from Coindesk, while showing the price at $7,369.
The price could fall to $6,000 if it loses the $7,400 support level, wrote another technician, again with the price already dipping below that number today. Could a larger correction be around the corner, asked a third.
Well, yes. When a major trading house like OKEx makes traders take losses when they should have wins, it’s going to cause real investors to get a little discouraged. When a U.S. exchange operator gets jail time for laundering drug money with bitcoin, that’s not going to encourage mom and pop investors to take a flyer on it.
But could this be the death before the resurrection?
ICE, ICE Baby
While the current, unregulated bitcoin market is poised on the precipice of collapse, the Atlanta-based owner of the New York Stock exchange is prepared to go into it, big-time.
Intercontinental Exchange (NYSE:ICE), which got its start in 1999 running futures markets, bought the New York Stock Exchange in 2012 for $8.2 billion and now has a market cap of $42 billion. The shares are up 153% since the NYSE transaction was announced and split 5:1 in 2016.
If you want to win the game, put your money on the house.
ICE announced on Aug. 3 a new company called Bakkt, aimed at creating a federally regulated market for bitcoin. The new unit is headed by Kelly Loeffler, who happens to be the wife of ICE CEO Jeff Sprecher.
Loeffler said that ICE has been working toward this announcement for 14 months, aimed at creating a host of new funds and trading vehicles for bitcoin investors, including 401k accounts and eventually credit cards. While they’re coy about who is doing what, and specifically who owns how much of Bakkt, ICE did drop names like Microsoft (NASDAQ:MSFT) and Starbucks (NASDAQ:SBUX).
This is not a fly-by-night operation. Sprecher got into the trading business as an outgrowth of the transaction processing industry where Atlanta is the market leader. ICE revenues last year were $4.6 billion.
The plan is the reverse of how bitcoin began, however — a centralized, regulated exchange in place of the current distributed, unregulated global hodgepodge. The plan got its start in 2015 with a small investment in Coinbase, the largest U.S. bitcoin exchange. The idea is that by putting bitcoin into the asset mainstream it becomes a mainstream asset.
The Fortune story describing all this was published just an hour before the New York Stock Exchange opened for trading, and bitcoin prices rose about $20 each over the next hour, to just over that $7,400 support level.
But Is It Bitcoin?
The early July run on bitcoin, to over $8,000, was driven by reports that an Exchange Traded Fund for bitcoin would soon hit the market. But that move was rejected by the Securities and Exchange Commission on July 26, leading to the latest price fall.
The ICE move could lead bitcoin prices higher, but if it’s just another asset traded on regular exchanges, the question occurs, is it really bitcoin? Bitcoin was designed as a decentralized blockchain, controlled by no entity, a global market anyone could enter. As a plaything of the New York Stock Exchange, fully regulated by the SEC, is it the same asset?
If bitcoin is something you can put in your retirement fund, or use through your credit card, what is it worth? The answer to that question will only come in November, after Bakkt opens.
Dana Blankenhorn is a financial and technology journalist. He is the author of a mystery novella involving Bitcoin, The Reluctant Detective Saves the World, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT, but no cryptocurrency. To follow the value of cryptocurrencies bookmark https://coinmarketcap.com/
