Large corporations and financial institutions have considered the crypto ecosystem risky. Some have typically viewed it with skepticism. But since 2020, these institutions have changed their perception and now see it as a digital asset. That’s because the Covid-19 pandemic caused global lockdowns and affected businesses significantly. Governments had to put economic stimulus measures and reduce interest rates to almost zero. People always choose to invest Bitcoin with a reliable trading platform like Immediate Edge
Perhaps, the impacts of the Covid-19 pandemic sparked institutional interest and changed business leaders’ perception of cryptocurrencies. Bitcoin’s narrative changed into an inflation hedge, with some calling it digital gold. The May 2020 halving strengthened this shift in perceptions. Also, the 2021 cryptocurrency Bull Run changed people’s perceptions when Bitcoin’s price hit the record high of $65,000 in April and $69,000 in November.
But things haven’t been solid for the Bitcoin market. After the cryptocurrency hit record highs, it lost almost 55% of its value, reaching lows of $30,000 in July. The cryptocurrency’s market capitalization also dropped to nearly $1.199 trillion. The subsequent crashes led to further dipping of Bitcoin’s market cap. Nevertheless, institutions have continued to invest in this virtual currency despite the ups and downs. Here’s how institutions invest in Bitcoin.
Asset Management
Some institutional investors see Bitcoin as a digital asset. In that case, cryptocurrency has seen a significant, rapid increase in value and interest over the years. According to some investors, Bitcoin represents a modern asset class that will gain broader acceptance. Some experts argue that prominent players in the crypto industry will move into specialized use cases like NFTs and De-Fi. Currently, most of these investors are looking for Bitcoin exposure.
Some experts argue that Bitcoin plays a vital role in asset portfolio management, including its use to achieve diversification and boost returns. Currently, some researchers note that institutions with crypto investments outperform those without, meaning they may increase their investments.
The unprecedented events, like Covid-19 and the war in Ukraine, are some of the things that may prompt more companies to invest in Bitcoin. Thus, institutional investments may increase as more businesses learn about Bitcoin.
Transacting with Bitcoin
In addition to adding Bitcoin to their asset portfolios, more institutions accept Bitcoin payments for services and products. Payment giants and financial gatekeepers make it easier for their customers to transact with Bitcoin.
An increasing number of institutions in different industries, including tech, airline, and financial service providers, allow customers to use Bitcoin on their platforms. For instance, PayPal and Venmo, its mobile subsidiary, added Bitcoin services in 2020. The company announced a service enabling users to purchase, hold, or sell Bitcoin.
Grayscale’s Investments
There has also been an increase in non-trust ETPs inflows. These investment products spring up in Europe and Canada, attracting more institutional investors that want cryptocurrency exposure without managing their assets. For instance, institutional investors can trade Bitcoin derivative futures on the Chicago Mercantile Exchange. As of May 2021, Bloomberg reports there was $6.9 billion worth of Bitcoin ETPs.
Although this could be a drop in the sea regarding the entire asset management sector, future regulations might bolster this sector’s institutional adoption.
Parting Shot
Despite Bitcoin’s price fluctuations, more institutional investors want to purchase, hold, or trade this cryptocurrency. Perhaps, that’s because Bitcoin has shown the ability to withstand economic turmoil as it did during the Covid-19 pandemic. Research shows that more institutions continue to buy the dips, especially on China’s ban heels. Also, the Russian-Ukraine War and high interest and inflation rates have boosted Bitcoin adoption by institutions.
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