Institutional investors are believed to drive the cryptocurrency market’s adoption and growth. Their involvement promises to make crypto widely recognized and accepted as a truly global currency. Bitcoin is supposed to gradually become an alternative to gold and skyrocket to unprecedented crypto prices.
But is this really how institutional investors work? In which direction are they actually driving the crypto market — and, after all, who are they? In this article, we will bring you the latest examples of huge whales’ interest in crypto, discover the reasons for that, and describe the ways they are actually affecting the market.
In brief: traditional markets are bringing less profit than before, and large investors find crypto investing lucrative. They were skeptical about it before, but now the crypto market looks mature and reliable enough to invest in. Institutional investors will bring stability and efficiency to the crypto market.
What’s happening?
Firstly, let’s run over the latest news — 2020 was rich for the news on how institutional investors are coming into play:
Microstrategy investments
In August and September, this Nasdaq-listed business analytics and mobility platform has invested over $425 million in Bitcoin. The latest $50 million they have put in December when BTC was already over $19K. With the current crypto market cap growth, Microstrategy has far over $700 million in Bitcoin — showing an example that might be quite inspiring for the corporations.
Public support for Bitcoin
BlackRock is an American global investment management corporation with $8 trillion in gold assets in management. Recently, their chief investment officer of fixed income Rick Rieder told that Bitcoin is a highly functional asset and is gaining interest among millenials. Rieder says Bitcoin “could take the place of gold to a large extent” in the future — an unprecedented act of support for Bitcoin from an organization of such class.
PayPal to support cryptocurrency
Since early 2021, the platform’s 361 million customers will be able to buy and sell Bitcoin, Ether, Litecoin, and Bitcoin Cash. The company’s goal is “to increase consumer understanding and adoption of crypto coins,” which quite aligns with this article’s topic. Another payments platform Square has earlier announced investing 1% of its assets into Bitcoin.
36% of institutions have invested in crypto
As shown this summer in a survey by Fidelity Digital Assets company. 774 institutions participated in the study, and it came out that 45% of European and 27% of American companies (compared to last year’s 22%) hold crypto or derivatives. “These results confirm a trend we are seeing in the market towards greater interest in and acceptance of digital assets as a new investable asset class,” researchers conclude.
What is driving the investors’ interest?
Safe assets are in a worldwide crisis
In recent years, the traditional ways to preserve money such as savings accounts and high-quality blonds like U.S.Treasurys were shown to bring much less income than before. Sometimes the profits are so low that they are even eaten by inflation, which turns the return on investment negative. In this regard, crypto looks attractive as the biggest currencies show extremely high ROI in the long term.
Notably, this promises to be a temporary effect. When the traditional market recovers, good old financial instruments are likely to return attention back.
Some countries’ fiscal policies discourage investors
Nations such as Denmark, Switzerland, and Japan use negative interest rates to support their economies. It’s good in terms of beating deflation, but negative and low interest rates are not what a crypto investor is really keen on.
Crypto’s inspiring rapid growth
With the fulminant tech advancement in crypto, the young crypto market does already have very promising and at the same time, mature enough projects that demonstrate good ROI and overall credibility.
Inspiring examples create the fear of missing out
Investment decisions such as that of Microstrategy give a strong signal to the market that crypto is worth it. Other corporations are watching this and might be starting to think of doing the same. And while some are only thinking, the others are doing. This effect might be cumulative.
More regulation brings more trust
Remember the ICO craze in 2017 when ones were using the earned millions to develop, while others were committing exit scams and frauds? These days are gone, and with effective regulation taking place in multiple jurisdictions, crypto is now more trusted than ever.
4 effects institutional investors have on the crypto market
Will all the examples and their reasons, now it’s the time to see how whales actually affect the market. And here are some common myths that we will debunk now.
Institutional investors help the crypto market mature, making it more efficient
There’s a common misconception that whales will critically centralize the crypto market killing its initial idea of a trustless, intermediary-free decentralized world. The opposite point of view is that when enough institutionals come into play, Bitcoin will shoot to the moon. However, these are very polar ideas that are somewhat equally far away from reality.
And the reality is that institutional investors will use their experience to limit their risks and maximize their returns. This means they will fight volatility and increase the market’s liquidity. And these two things are going to result in the following:
Yields might decrease, but that’s inevitable
It is a normal thing for any market that when time passes, there becomes more stability and less volatility. This is a natural scenario for every market’s maturing. Bitcoin is likely to bring huge ROI in the recent future, but that may not last forever. Whales will sacrifice volatility to stable, but not crazy, incomes.
Investors themselves are not crucial for Bitcoin’s growth
Here are what are: Bitcoin’s adoption rate and the current macroeconomic situation. Whales are a big part of this scene, but many other factors affect the economy which limits their influence.
As for the adoption rate, remember the news about PayPal from the beginning of the article? PayPal’s crypto integration means Bitcoin could triple its user base. Experts say this would have a huge impact on the industry.
Seize your opportunities in crypto
While whales like described above buy and hodl Bitcoin, many regular users try to get maximum profits from the crypto market as well. Selling Bitcoin now looks like not the best idea, but the wish to use this crypto is also high. This is where Bitcoin lending and other crypto lending helps. Cryptocurrency lending services like CoinRabbit allow users to get a crypto loan in USDT in a fast and secure way at a reasonable 50% loan-to-value rate. While you still own your Bitcoin, you now have some extra money for your current needs. You can back to our crypto lending platform to repay your cryptocurrency loan at any time. Learn more about using your Bitcoin without selling it here.
