A new report from Wedbush Securities suggests the price of bitcoin will continue to be volatile – but adds that this is necessary for the market’s growth and maturity.
Entitled Embracing Volatility: Trading as Bitcoin's First Killer App, the latest report from the financial services firm concludes that fluctuations in bitcoin’s price, far from harming the currency, will benefit its underlying infrastructure.
, the author of the report, said:
However, he added that the challenge for the wider bitcoin ecosystem will be to provide a volatile market for investors alongside a stable user experience for consumers.
The power of market perception
The report also assesses the effect of investor perception on the bitcoin market, further reiterating the firm's belief that 1 BTC could one day be worth $1m.
While this bullish sentiment remains prevalent in the market, the Wedbush report notes that when this long-term outlook is disrupted, the markets movements can be fierce.
Should market perception of bitcoin's long-term growth change even 0.01%, the report says, the market could see a $100 change in current valuation, or about a 10% rise or fall in prices.
However, according to Luria, this volatility will attract new participants:
Advanced financial trading to continue
Luria also suggested that this belief has been established through talks with Wall Street traders, who they say see an opportunity given that the market's sometimes severe reactions to news.
Further, he added that the recent rise of advanced financial trading products in the bitcoin ecosystem is likely to continue to cater to these new participants, stating:
The finding is notable as margin trading was most recently at the center of controversy surrounding bitcoin's latest price decline, with many in the community labeling it a contributor to two flash crashes on major exchanges.
The exchanges that offer such services have dismissed the claims.
For more on the findings, view the full report here.
Market analysis image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.