One look at the crypto market since January 2017 and you’ll see that we have had one hell of a ride! We ran up to Bitcoin at $20,000 and then just as quickly ran back down to about $6,000 and we have bounced for months at the lower end.
Many veteran crypto investors and crypto experts have hypothesized that once institutional money enters the crypto space we will see mass adoption and crypto will become more mainstream.
But why do institutions want to get involved now?
Bitcoin has been around for a few years now, so why choose this point in time to get involved?
“When it’s that easy [for institutional investors to enter the market], the price of Bitcoin or Ethereum is going to go much higher. And that is a lot closer than people think. The institutionalization of this space is coming. It’s coming pretty quick.” Mike Novogratz
1. Early stages.Crypto is still in its infancy and new technology is rapidly being created in the space so this is a perfect time for big money to enter the arena. Crypto has huge growth potential and has proven itself as a strong asset class. If and when crypto does take off, institutional investors will want to have been in during the early stages to catch the bigger gains.
2. SEC recent actions.The SEC rejected the Winklevoss twins latest ETF application and delayed ruling on the VanEck application but they ruled earlier this year that Bitcoin and Ethereum are no longer considered securities because these have become decentralized enough.
3. Improved custodial services.Coinbase has stated they are considering adding other crypto assets to custodial services in order to allow institutional investors to store crypto safely. And Goldman Sachs has considered offering custodial services to their customers as well while Ledger (a cold storage wallet company) offered support for another 8 cryptos.
4. Past performance. From 2012–2016, Bitcoin grew an annual average of 106%, 6.5 times more than tech stocks. In the past year, Bitcoin has seen growth of 1,318% and Ripple saw 36,018% growth. Many crypto experts are confident that crypto total market cap with top $1 trillion by the end of this year.
5. Positive global crypto regulations.Many investors, veteran and newbie alike, have feared what crypto regulations would look like because we have long been allowed to do as we wished within the space. Some have profited largely from this and others have lost a lot of money to foolish decisions and scams. But, crypto regulation that has been discussed worldwide has been overall positive. Japan recognizes crypto as legal currency and they have allowed several crypto exchanges to operate legally within the country. Japan, Switzerland, Thailand, and Philippines have all developed regulation for ICOs that seems to be reasonable and in the best interest of protecting investors from bad investments.
Institutional investments are rapidly gaining ground as the crypto space matures and institutions are entering the market at an unprecedented rate. This will help the total market cap to grow and will aid in mainstream adoption. Many believe institutional money will add credibility to crypto as a whole.
Why do you think institutional investors are entering the space? Do you agree with my assessment? I would love to hear your thoughts! I am always looking to learn something new or to have a discussion.
Thanks for reading,