How Institutional Investors Participate in Bitcoin Price

Bitcoin price rise is phenomenal, mind-blowing as investors roll in profit with bitcoin tripling in price. Industry leaders and experts predict a prolonged bull run.

 

JPMorgan Chase & Co, an American multinational investment bank, predicts bitcoin’s future performance. The global leader in the financial service told Bloomberg that bitcoin can reach $146,000 in the long term, competing with gold as an asset class. Bitcoin can only attain this price level if its market capitalization at $575 billion rises by six times to march the total private sector investment in gold. The realization will depend on bitcoin volatility and what they call ‘a convergence between bitcoin and gold’ that will stir up institutional investors’ interest.

 

 Bitcoin price rose rapidly in the past few months, hit its all-time high since March 2020, at the $34,000 threshold on Monday, rallying over $35,000 at 11 percent. As the trend is on-going, Bitcoin would likely hit $40,000 before the weekend, the price has risen to 300 percent, in the past six months. 

 

Bitcoin’s current price surge is not another crypto bubble like what happened in 2017. This time, the bull run is not triggered by retail investors, but big-name institutional investors, institutions, hedge funds are behind the wheel. 

 

Big-Names and Institutional Investors in Bitcoin

Increased institutional investors’ participation in the crypto space is a major reason for the continuous price surge. The virtual assets received mainstream acceptance amid the pandemic, following the lockdown, prices shot up despite the downturn in prices of other goods and services. Most of the institutions recently taking the bold step to embrace digital assets are in the tech and financial service industry.

 

Mass Mutual Recent Purchased $100 Million Worth of Bitcoin

Massachusetts Mutual Life Insurance (MassMutual), recently purchased $100 million worth of bitcoin for its general investment account. Though this is minimal compared to the total investment account of the insurance company valued at $235 billion as of September 30; it signifies mainstream adoption for the top digital asset. According to the Wall Street Journal reports, MassMutual purchased the bitcoin through a New York-based fund management company NYDIG, formerly known as New York Digital Investment Group.

 

Scott Minerd, a chief investment officer of Guggenheim Investments, who has $233 bitcoin in total asset under management (AUM), spoke to Bloomberg on bitcoin worth. Discussing his view of Bitcoin scarcity and valuation relative to gold, he said Bitcoin has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions.

 

Coinbase Robinhood IPO Aimed for Early Q1and Q2

Coinbase may be one of the largest crypto exchanges, it is still not yet publicly listed. The US-based exchange recently filed an IPO, aiming the Q1 of 2021 as its Robinhood IPO target. The digital exchange’s Robinhood project is a six-year-old trading app for younger inexperienced investors. Robinhood download surged from 2 million to 13 million within 3 years following the recent collapse in stock price from March to April 2020.

 

Paypal Adoption for Bitcoin and Other Digital Assets

Paypal’s announcement in October 2020 revealed its plan to begin supporting cryptocurrency. The payment processing company platform will enable users or account holders to store, buy, and sell popular digital assets. It will support major cryptocurrencies such as Bitcoin, Ethereum, Bitcoin Cash, and Litecoin for US users. 

 

The payment giant is not in this move for adoption alone, it plans to extend support to its money-sending subsidiary Venmo and international markets in 2021. Paypal is the most significant company in the financial technology sector to support virtual currency adoption.

 

Why Institutional Investors Drive Crypto Turnaround

The high increase in institutional investors’ interest in Bitcoin and other assets cannot go unnoticed. Big-name organizations, private banks, and wealth managers are all looking to add bitcoin to their investment portfolios. Institutional investors are releasing sustainable financial energy into the crypto space, unlike individual investors who are driven by quick gains. This interest has stirred a huge turnaround in the crypto industry. Institutions, experts, and investors formerly regarding virtual assets as high-risk investments are now looking to boost their crypto investment portfolios. More merger investors’ are interested in Bitcoin which pulls up other digital assets as it rises in price. 

 

Before now, the institutions were sitting on the fence watching the whole activities in the crypto space. 

 

“What is this fresh flavor in the crypto space that has slithered into the nostrils of our big-names, drawing them out to invest in Bitcoin?”

 

Instability in World Economy Following the Pandemic

The pandemic shook hard on the world economy, so many organizations incurred losses for the greater part of 2020 as the world was shut down in business activities. Working hours were reduced, the production rate went down drastically. Study shows United State will lose $3.2 trillion to $4.8 trillion in Gross Domestic Product over the next two years.

 

Besides the health and food processing industry, the crypto space thrived strongly during the pandemic, it became a haven for investors instead of a risky investment as it was known before. Investors turned to the crypto market due to uncertainty, and major currency devaluation as the government brought up stimulus packages to cushion the effect of COVID-19.

 

Price Volatility And High Liquidity

The major draw for investors into the crypto market is price volatility and high liquidity. An asset is volatile if there is a high rate at which price rises and falls over a sustained period. Volatility measures the degree or percentage of return for a given security or market index. It attracts institutional investors to the crypto market and makes it possible for the industry to develop rapidly.

 

Liquidity is the ability of a coin to be converted into cash or other coins easily. It is an essential feature for any tradeable asset, and that includes Bitcoin. Institutional investors have a vested interest in the crypto asset because it keeps traders in good positions that allow quick exit. 

 

The crypto market fulfills both the demand for liquidity and volatility. Other investments as real estate have volatility but lack liquidity. The stock market measures up in liquidity but not in volatility. The crypto market is emerging and exciting for institutional investors who expect high returns on investment. Crypto volatility indicates more growth and opportunity.

 

Cryptocurrency Offers Investors Hedge Against Market Risk And Government Policy

Investment in digital assets has become a haven for institutional investors to avoid risky market situations. Cryptocurrency can provide investors with ways to hedge risk against government intervention. The traditional assets can be easily affected by monetary policies and economic pressures.

 

Institutional trading on Bitcoin derivatives grew rapidly last year, study shows institutional investors account for over 40 percent of trading volume on exchanges. 

 

Corporate interest in Bitcoin and other cryptos will increase more as awareness increases. Digital assets can be one way to hedge against inflation when government and central banks are printing currency to stabilize their economy.