Institutional Investors Are Piling into Bitcoin
The year the Bitcoin goes institutional is upon us
The start of 2020 hardly seemed promising for Bitcoin, and by extension to the entire crypto market. Overall liquidity was low, and institutional investors were not too keen to partake. Then, out of nowhere, Pandemic shuck the entire world. Due to numerous central bank spending streaks, Bitcoin’s value started to skyrocket. By the end of the year, we all witnessed a jump of more than 200% since the beginning of the year. As a result, the entire crypto market’s value surpassed $1 Trillion.
What Caused the Increase?
The cryptocurrency has been around for over a decade, but it only started to peak mainstream institutional investor’s attention last year. As time passes, Crypto bulls are increasingly more vocal about Bitcoin’s perceived value as a hedge against inflation, much like gold. One of the biggest drivers of this trend is the continuous entries of institutional players.
According to analysts, Bitcoin’s price jump in 2020 was greatly fuelled by famous Wall Street billionaires support of the crypto coin. Thanks to their endorsement, many mainstream investors overcame their doubts and started investing confidently. Coins inflation hedge got in the spotlight when investors such as Paul Tudor Jones and Stanley Druckenmiller both put their money and trust in Bitcoin.
However, there was an additional push from large companies like PayPay, Fidelity, Square and MicroStrategy. According to industry insiders, this trend is likely to continue over the coming months. This second wave is expected to come from retail investors and their fear of missing out. Trading Bitcoin has become more accessible in the past years and there is little to no stigma attached to it, so more and more people are expected to join the hype train.
Are There Regulation Hurdles?
Many pointed out that this new crypto coin development resembled Bitcoins’ frenzied rally to $20,000 in 2017. Unfortunatelly for many traders, what came next was a huge let-down. In 2018, there was a sharp pullback which wiped out billions of dollars in the market capitalization. This time, crypto fans are saying that this rally is different. The main cause of this is attributed to institutional buying instead of retail speculation.
Another huge difference is clarity in regulation. Back in 2017, it was scarce, to say the least. This time, most regulators across the world have people working on crypto internally. According to PwC’s global crypto leader Henri Arslanian, many large financial centres have a good clarity on crypto markets. This is comforting not only for institutional investors but to retail investors as well. He expressed his optimism when it comes to current momentum. Arslanian is saying that rather than just spectating the price of Bitcoin, he is keeping a close eye on the number of new institutional players coming in 2021. This, most of all can have a positive impact on the markets.
The biggest hurdle institutional investors had to overcome in order to jump on board was Bitcoins variance. Traditionally, investors do not like large amounts of variance. As they measure their returns each month, they would prefer to see lower gains rather than “downdrafts” in performance.
The second issue for most institutional investors was a failure to understand Bitcoin’s inherent value. For a long time, they only perceived it as nothing more than a speculative gamble. Some conservative investors will probably stick to what they know and what made them money in the past. On the other hand, we are seeing more and more institutional investors who are willing to step outside of their comfort zone and make long-term investments in Bitcoin.
Should You Still Invest?
As much as critics hate to admit it, the entire system is not only standing on its own feet but has even flourished. This fact in itself is very important when accessing the longevity and potential of the crypto markets. Bitcoin still has a long way to go in proving itself as being more user-friendly or efficient than traditional money. But for the first time, no one can deny its overall resilience. This is an important win for Bitcoin and many investors can no longer afford to ignore it. Remember that, if you feel this suits your levels of risk, you can start trading in a moment’s notice by clicking here, and logging in your account.