The Problems of Institutional Bitcoin Investments from the Crypto Perspective

Initially, the main idea behind bitcoin was to slowly phase out traditional institutions. Yet, ironically, to do that, institutional investors are very much needed to push the network towards mainstream adoption boom. Without them, like in the last bull run of 2017, the crypto market would be hard-pressed or completely powerless to seek out another major price hike.

In other words, institutional cash is needed to propel the price of bitcoin above its current ebb and flow and truly begin a fresh bull run. In theory, it would be able to break the $20,000 barrier that was created last time around, but for that to happen, serious cash for serious institutions on a global level is very much needed.

Yet, right now, it seems that institutions are keeping their distance from the crypto market. One startup in the industry, called BlockFi, reported recently that the need or interested to invest in crypto impacts only 1.3 percent of the total business population of the private funds. This is well below even conservative expectations from just a couple of years ago and the picture does not appear to be changing even as the months turn into the new decade.

Out of Bitcoin Influence

CryptoOracle, which is a community-focused venture capital company, recently hosted a conference that brought together some big names from the investor ecosystem. They came from different backgrounds and interests but had a cohesive idea about institutional investment in bitcoin and other cryptocurrencies as well.

While all of them agreed that they are firm believers in the importance of this technology, they are all very measured in their expectations from the industry. That is why all of them underlined that institutional investment is coming, but it is over one year in the future. While this is not exactly a groundbreaking piece of news, the group did offer their views on the critical elements. These include several categories in the crypto infrastructure.

Those are regulated ventures as well as futures exchanges, qualified custody and finally data providers that offer valid information on an industrial scale. At this point, there are institutional solutions in all of these categories, but they are simply not good enough. Instead, in the US for example, dedicated custody clarity provided under SEC is an absolute must for any exchanges. The same is true for many other elements inside of these three main categories.

Institutions are Coming

No one could argue that institutions are jumping into the crypto pool en mass. However, there is a lot of evidence showing that they are getting a taste of the water. Recently, Grayscale Investments, a company that is among the leaders of the crypto investment services, showed that it had a record quarter.

In the last three months, it managed to get over $254 million. The majority of the fiat inflows, covering both bitcoins and bitcoin came from big institutions. The company stated that 84 percent came from entities like hedge funds. In other quarters, analysts are pointing to Bakkt and its successful launch in September. While this bitcoin futures provider did not break the crypto bank once it got rolling – as many hoped – it is still a valuable new addition to the crypto circles, especially from the perspective of the investors in the institutional domain.

It also brings to the table a new layer of quality when it comes to transactions. In a way, Bakkt is another means for investors to sell their crypto holdings, giving them another exit. The traditional markets showed that more exists are presented to the investors, the more likely they will be to enter it. Otherwise, what is the purpose of buying if an entity cannot then sell the same portfolio or part of it at a reasonable market price?

Things like these show that the basis for institutional operations is getting hoisted up and it is not taking steps backward. While the building process is not as fast as many would like it to be, there is no way that anyone could deny that the environment is stronger today than just one year ago. It will be stronger in 2020 than it is right now.

Benefit but not a Necessity

Lastly, from the cryptocurrency perspective, especially bitcoin and its ecosystem, the entrance of institutional players is not a necessity for success. From the mainstream media, there is a lot of value in these types of discussion, but for many in the crypto domain – not just die-hard crypto evangelist – the institutional introduction is not a key factor to success. Instead, bitcoin has already succeeded in getting into the minds of ordinary individuals, from Hong Kong and India to the US and EU. Their reason for participating will be diverse as they are now.

Bitcoin Participants

Some will want to try out HODL and put $100 into something they find wacky. While they do, they will still learn how to set up their crypto wallet, how do transaction work and many other things. For people in Venezuela for example, using bitcoin is no joke and often is related to the very basic life necessities. They use bitcoin to make sure their money will stay valuable tomorrow and the day after.

For the Honk Kong protestors, the use of bitcoin is a means to make sure they can keep a level of government firewall against seizures and ATM blocks that Beijing can otherwise order. There, in all those places, the actual growth of the bitcoin network will occur – more and more people using bitcoin for commerce and retail.

They will enter the market and stay there, just as a person in the US goofing with 0.01 BTC will never unlearn all about the network. With this, the institution will eventually get on board, not as trailblazers but followers of lucrative market opportunities. The real effect will come from the continual introduction of new esports players, digital marketers, crypto punks, downtrodden and anyone else who could benefit from having access to a non-governmental payment and financial storage system.

Source: newsBTC