The Institutional Interest In Cryptocurrency And Blockchain
A recent study revealed that more than about 30% of the top ICOs have dipped in value, and an enormous majority of ICOs are trading at a loss. All of this has led to a drop in the volume of trading thereby making it exceedingly difficult for the budding ICOs to raise more capital in the past few months. But what strikes as a surprise is the high amount of institutional interest in blockchain, the development of cryptocurrency infrastructure, and the launch of new capital.
A close correlation has been observed between the performance of the Nasdaq between 1994 and 2003, and that of Bitcoin between October and August, 2018. This has raised questions like whether the price of Bitcoin too will see an increase like that of NASDAQ. An interesting fact is also that a lot of companies that issued tokens will see the effect of multiplication in the market, with token prices likely increasing alongside Bitcoin, aiding the enhancement of the overall capitalization of the cryptocurrency assets in the market. Perhaps the price of Bitcoin will see pressure from different hard fork versions of its protocol, like Bitcoin Cash, Bitcoin SV, and many more. Regardless, one thing to keep in mind moving forward is the concern surrounding the operation of the Bitcoin blockchain and the enormous amount of electric power that it consumes, specifically from the public perception perspective of the average individual.
Reduction in retail involvement due to the adoption of cryptocurrency by institutions
Despite the significant fall in the capitalization of the cryptocurrency assets from $800 to $130 billion, there has been an uninterrupted flow of declarations from several multinational businesses and companies who are filing patents — including Amazon, Google, Facebook, MasterCard, and others — around blockchain due to an increased institutional interest in the technology. The institutional interest in blockchain has been further reinforced by stock exchanges in London, New York, Gibraltar, Malta, Singapore, Switzerland, Boston, that are working to launch of security exchanges and thereby enabling the enlisting and trading of tokenized securities. Allowing pension managers and mutual funds to easily invest in diverse cryptocurrency assets through listings on recognized exchanges could prove essential for growth. Another significant part of the framework that the institutional managers require for trading in cryptocurrency assets are custody services, and so Goldman Sachs, Fidelity, and Coinbase have confirmed that they will provide such services.
All over the world, banks are testing out blockchain technology for an extensive variety of use cases.
- In Europe, the ABN Amro bank commercially launched the Escrow management solution use case, and Allied Irish Bank and BNP Paribas are still in pilot mode with regards to domestic interbank payments and trade finance respectively.
- In North America, Citigroup is in pilot mode for a digital payment solution for the private securities use case, and Goldman Sachs and Wells Fargo are in a testing phase with equity swap trading and private label MBS securitization use cases respectively.
- Korean Banks and Woori Bank in Asia are in pilot mode with customer identification and cross border transaction processing use cases respectively.
The institutional interest in blockchain technology is not restricted to banking services.
- Vitana of Metlife is the first automated insurance product in the world for gestational diabetes powered by Blockchain technology.
- Beluga Pay of Pemex allows cryptocurrency payment at the Pemex gas station.
- TradeLane of Maersk IBM has established a joint business to conduct trading with the utilization of Blockchain technology.
- Walmart Food Traceability Initiative of Walmart has devised a way of tracing the leafy green products of Walmart back to the original farm by the employment of the platform powered by Blockchain technology.
- These are just some of the many use cases that are sprouting up around the world.
The institutional interest in blockchain and cryptocurrency resources was initially centred around raising capital, predominately for technology startups and new ventures. But alas, with almost $20 billion being raised against a setting of negligible guidelines and regulations, various con artists were attracted to the guarantee of making quick and easy money, and as such, vast numbers of the 4,500 of current ICOs launched on the market are bound to come up short. Nonetheless, crypto resources have heralded enthusiasm for this new asset class and the wider technology in general, and there is expanding and unmistakable proof that actual cash is being spent on valuable blockchain projects. Two examples of such are supply chains and loyalty schemes, both of which are being disrupted by companies leveraging blockchain technology.
Lastly, crypto resources are currently progressing on their way towards being utilized for offering partial proprietorship in substantial resources bonds, private and cited funds, property, and even products such as gold bars that JP Morgan is tokenizing. In this way, there are tons of proof that institutional interest in Blockchain and crypto resources is growing.
Blockchain innovation is not a worldview, nor are crypto resources the response to every one of our issues, although they do offer some impressive new apparatuses to limit the expenses of working together, and they offer straightforwardness, security, and control in our quickly digitizing world.