Most Institutional Cryptocurrency Investments Are Still Lagging Into 2022 (Opinion)

The reality for the cryptocurrency industry and cryptocurrency prices in 2022 is that institutional investments have only just begun. When it really happens, the market will suddenly and dramatically revise the exchange rate of cryptocurrencies upwards.

Without searching, how much money would you know or think institutional investors have traded with cryptocurrency so far? Just say bitcoin to make it simple.

A quick look around reveals a wide range of figures.

Whether it’s $ 6 billion or $ 70 billion, it’s still a fraction

But whether it’s this January 2022 Binance report referencing statistics from CoinShares, which says institutional investment in bitcoin was $ 6.3 billion in 2021, or this Benzinga report from August 2021. , which includes cryptocurrency holdings such as Grayscale, and calculated the total institutional investment in bitcoin at the time would have been $ 70 billion …

Institutional cryptocurrency investing still lags far behind retail investors and independent investors the size of a whale in 2022. Institutional cryptocurrency investing didn’t come until “pension funds, mutual funds, hedge funds. , investment banks, sovereign wealth funds and insurance companies “start allocating to cryptocurrency (HAT tip: Pat Rabbitte).

Even if institutional investors today held $ 70 billion worth of bitcoin, with a market capitalization of less than half what it was at the time of Benzinga’s report in August, they would still comprise only 17% of bitcoin’s market capitalization. If we assume institutional outflows from overall bitcoin outflows since August, then that’s less than ten percent of bitcoin holdings.

What if institutional investors reverse this distribution and hold 90% of all bitcoins? How much more would each satoshi be worth of the remaining 10%?

Cryptocurrencies and investors are almost ready

The global stock market capitalization exceeds $ 100 trillion to close 2020 and is currently around $ 125 trillion. During this time last year, $ 61 trillion (59%) of global equities were managed by institutional investors. So pension funds, sovereign wealth funds, investment banks and insurance giants have lagged behind the retail group in adopting cryptocurrencies.

First, it was the problems of cryptocurrencies, the problems that cryptocurrencies solve and how they solve them. Now, institutional investors are working through the constraints inherent in the nature of cryptocurrency adoption.

Funds that manage money that is not theirs to their clients are more risk averse. (But funds are becoming increasingly interested in ways of mitigating risk to add more outstanding return to their operations.) They also need to meet regulatory requirements. Furthermore, they must find the liquidity of an asset satisfactory. That way, they’ll have someone to sell it to when they want to get out of their positions.

Bridgewater: The cryptocurrency market is quite big now

The cryptocurrency industry has grown and matured by leaps and bounds right now in its development. Massive global institutional investment in cryptocurrencies is now possible. The tantalizing benefit it would be for holders now hangs over cryptocurrency valuations. Regarding liquidity requirements, a Bridgewater research note published in January 2022 stated:

“We think Bitcoin is around 1.4% liquid relative to US equities; this would involve maintaining a much smaller capital position in the liquid mix, but its high volatility means that a relatively small dollar allocation would still provide significant exposure on a risk-adjusted basis. “

At the end of last month, Kevin O’Leary, famous for Shark Tank, said that this extremely early stage for institutional cryptocurrency investing is why he decided to take the leap this year.

In an interview he pointed out that the majority of capital investments in the world come from sovereign wealth funds and pension funds and said their cryptocurrency allocation is still essentially “zero” at this point.

Only when they don’t adopt, O’Leary said, has institutional finance really switched to cryptocurrencies. He said this market capitulation is an opportunity for investors to anticipate the trend. O’Leary recommends using long cryptocurrencies before funds really start moving 1% of their holdings into bitcoin.

O’Leary predicts that the price of bitcoin will double overnight when the markets learn that this is indeed happening. He thinks this will happen by January or February 2023.

This assumption may not be too bullish. Fidelity Investments will allow retirement accounts to be allocated in bitcoin by the end of the year. The $ 4.5 trillion financial services giant made the announcement in April.

In May, Fidelity hired over 200 people for cryptocurrency developers and customer support staff to manage cryptocurrency products for its customers.

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