Wedbush: Wall Street Sees Opportunity in Bitcoin's Volatility

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.

Gil Luria

, the author of the report, said:

Luria noted that US bitcoin companies such as Coinbase and Circle are currently working on such solutions. When they are introduced, he said, it will become common for consumers to use wallets with small amounts of bitcoin for online transactions.

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 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:

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