Almost 2 months after the BTC Halving event earlier this year, a lot has happened for Bitcoin even though we didn’t see the sharp price surge many had expected. The Halving seems to have marked the starting point to a pivotal change in trader and investor behavior with increased institutional interest.
It may indicate a future for Bitcoin as a new asset class with institutional investors and large firms taking over from the young and digital generation of retail investors.
The signals of institutional interest in Bitcoin
Crypto research firm The Tie shared its findings in a recent report indicating Bitcoin is trading at an all-time high relative to its social media activity. The Tie said they’ve seen a significant drop in Tweets about Bitcoin as well as search terms “Bitcoin” and “buy Bitcoin” using data from Google Trends. It might be related to a slower COVID-19 economy but it seems retail investors have shown less interest in Bitcoin these days. Looking at the increased market cap for BTC, analysts at The Tie conclude that Bitcoin is being increasingly driven by institutional trading.
Supporting that conclusion, in June, Fidelity Digital Assets released the results of a survey held to dig deeper into institutional interest in cryptocurrency. Nearly 800 firms across the US and Europe participated in the survey, including financial advisors, pension fund managers, hedge funds, HNWI, endowments and family offices.
Key findings of the Fidelity Digital assets survey include:
- 74% of US institutional investors find crypto appealing, versus 82% in Europe.
- The fact that certain cryptocurrencies are free from government intervention is appealing to 25% of European investors, and only 10% of US respondents.
- 45% of investors in Europe and 27% in the US are already invested in digital assets
- Over 25% hold BTC, and only 11% have exposure to ETH.
- In 5 years, 91% of all participants who are open to investing in crypto expect to allocate at least 0.5% of their portfolio to digital assets.
The real activity of institutional investors
Shortly after the Bitcoin Halving, Bitcoin derivatives on the CME started to reach record figures. During May, Bitcoin derivatives surged 59% and reached $7.2 billion, representing a 16-fold increase over April.
Investment firm Grayscale recently added 19,879 BTC to its Bitcoin Trust, which brings the firm’s total volume of Bitcoin to 400,000, putting the firm in the position of managing $4.1 billion in total.
Nomura, one of the top banks in Japan, recently launched its crypto custody service for institutional clients. The service is called “Komainu” and was created in partnership with Coinshares and Ledger.
Canadian asset manager 3iQ launched The Bitcoin Fund, a fund tied to BTC on the Toronto Stock Exchange making it the first firm to successfully release an offering like this commercially on the exchange. London-based ETC Group announced the launch of a similar offering on Germany’s Xetra, a digital stock exchange.
What will happen next?
With the Fed’s bond buying program and QE earlier this year, more investors, including institutional investors, see Bitcoin as a hedge against inflation. It is likely that more financial firms both large and small including banks, exchanges, brokers, payment providers and fintech services providers begin to participate in the crypto-economy with dedication and commitment.
On the whole, the sentiment is bullish for Bitcoin, but instability and market manipulation remain challenges and obstacles for institutional investors. All the more reason for crypto exchanges such as AAX and others alike to double-down on their commitment to creating robust trading infrastructure that matches and exceeds the institutional need for transparency, auditability, and technical capabilities.
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