Why are institutions suddenly interested in Bitcoin?

Certainly, Bitcoin (BTC) has become increasingly popular with institutional investors. At the end of the second quarter of 2020, Fidelity reported in a survey of nearly 800 institutional investors that 36% owned crypto assets. Another survey conducted by crypto wealth insurance company Evertas told respondents that hedge funds will dramatically increase their holdings of crypto assets. He projected that too 90% of institutional crypto asset holders expect to invest even more in bitcoin in the next year.

From MicroStrategy and Grayscale to JPMorgan and Goldman Sachs, Bitcoin has cemented its place in investment portfolios as an asset to hedge against inflation and currency depreciation.. Beyond that, however, there are real technical reasons why institutional investors are becoming increasingly optimistic about Bitcoin Some predict it will hit $ 1 million by 2025.

While the future value of Bitcoin may continue to be controversial, in reality it is Investors and financial institutions are now saying that “BTC can be less risky than not having any exposure to Bitcoin at all”.. Indeed, according to crypto research firm Messari, Over 81,000 BTC are among the “treasures of listed companies”..

A total of 81,154 BTC or 0.5% of all BTC in circulation is held in the treasuries of listed companies.

Why are institutions suddenly interested in Bitcoin?
Why are institutions suddenly interested in Bitcoin?

But what drove the 2020 Bitcoin rally, and what are institutional investors seeing in Bitcoin now that they haven’t seen before?

The limitless network of bitcoin and blockchain technology

Bitcoin acts as a non-state currency that does not correlate with other asset classes. For institutional investors, it serves as a diversification tool to hedge against strongly correlated markets such as the SP 500, the Nasdaq and the dollar.. Two main areas where Bitcoin and Blockchain technologies provide institutional investors with the greatest benefit are in secure, limitless transactions and access to new opportunities that cannot exist in traditional financial markets.

Bitcoin’s innovative technology, including smart contracts, limitless payments, lower fees, and faster, safer transactions, is what drives it it will prepare us for a future in which national currencies break out of their current physical form and are digitized.

With US dollar inflation looming, well-known investors like Ray Dalio and Paul Tudor Jones are starting to “increasingly like Bitcoin” and have identified it as the “best hedge against inflation”. Comparison with gold and copper. As banks and technology providers continue to invest heavily in research and development projects related to auditing and recording financial transactions such as JPMorgan’s new corporate blockchain and Onyx digital currency, we will continue to see institutions. Increase your presence in space.

Introduction of high-quality depot solutions

Custodians are used by financial institutions such as hedge funds and mutual fundswho are obliged to keep the clients’ assets with a professional custodian bank for regulatory purposes.

Previously, institutional investors were wary of Bitcoin and other cryptocurrencies due to the regulatory environment, and until recently, the broader crypto ecosystem also suffered from a serious shortage of crypto-asset custody solutions for institutional clients. With the urgent need for suitable custodian banks to safeguard the growing number of crypto assets and the increasing clarity regarding regulatory guidelines for trading and investing in cryptocurrencies, a custody account solution sector was born..

Anchorage, a newly established crypto custodian, supported by Andreessen Horowitz and other leading blockchain-oriented venture capital companies, is one of those solutions. He joined the spirit of Provision of a custodian bank for digital crypto assets for institutional investors. The Bank Frick, a private bank based in Liechtenstein, has made offering a range of blockchain banking services a priority, including support for starting tokens, crypto trading, and custody of digital assets. The regulated bank’s services are aimed at professional market participants and financial intermediaries in Europe.

Banks have also been given the go-ahead for crypto company custody. In a communication to the public in July, Jonathan Gould, Senior Deputy Comptroller and Senior Counsel of the Office of the Comptroller of the Currency, wrote:

“We have come to the conclusion that a national bank can provide these crypto-custody services on behalf of customers, including possession of the unique cryptographic keys associated with the cryptocurrency.”

This was an important advancement across the industry allowed regulated financial institutions to have the same custody services that were previously in the hands of specialized firms.

Bank custody options along with the advent of crypto insurance companies like Paragon International Insurance Brokers, which recently became part of Bitstamps offerings, provide guidelines for digital assets such as Bitcoin to be protected both online and offlineat the same time that cover a range of crime-related circumstances.

The regulatory and custody solutions that have been adopted provide security for institutional investors who might otherwise have been skeptical. They also help take crypto exchanges to a higher level. Encouragement to protect investors’ money from theft or misappropriation. This has become a major catalyst in making digital assets more attractive to institutional investors and funds.

The institutional demand for Bitcoin

As the crypto market has seen an increase in institutional investment with large purchases by an increasing number of companies, this has been correlated with a rebound in the markets.

According to a report by the cryptocurrency derivative platform Zubr, lInstitutional investors tend to hold (hold) bitcoin in “physical” form rather than cash settled futures. The integration of institutional investors into the crypto ecosystem and their interest in maintaining it is a positive sign of mainstream acceptance. The similarities these investors share with the owners suggest an easy transition from traditional finance to the digital economy that instills trust in Bitcoin and represents an understanding and belief in the technology.

The benefit for both parties is also the great potential of decentralized financing, which has introduced a torrent of new trade flows, products and services. Services from companies such as Maker and Compound enable individuals to obtain credit of any size in minutes without having to reveal their identity to third parties, while the returns associated with the new DeFi products result in profits greater than these. of savings accounts, certificates of deposit and other traditional options.

The potential benefits of the DeFi revolution are just one more reason why the cryptocurrency dynamic is shifting to what believers have always wanted: a digitized, limitless good.

The proof lies in the numbers as institutional investors come for the cryptocurrency

According to a recent survey by Fidelity Asset Management 80% of the institutes surveyed consider investments in digital assets to be attractive, while the number of Bitcoin addresses has increased steadily. Addresses with more than 1,000 and 10,000 bitcoins have also increased significantly. This, in conjunction with falling exchange rate balances, suggests this Whales and major investors are choosing Bitcoin.

A report by the Big Four auditing firm KPMG also found that lLeading banks, asset managers and qualified custodians are launching a new wave of institutional grade crypto products and services. Institutional cryptocurrency investments confirm trust in the digital asset from a key place of power.

This article does not contain any investment recommendations or recommendations. Every investment and trade movement is associated with risks. You must do your own research when making a decision.

The views, thoughts, and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Paolo Ardoino He joined Bitfinex in early 2015 and is now its Chief Technology Officer. After graduating from the Computer Science University of Genoa in 2008, he began working as a researcher on a military project that focused on high availability and self-healing networks and cryptography. Paolo was interested in finance and began developing finance-related applications in 2010. At the end of 2013 he founded Fincluster.

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