Over the last year, a handful of crypto exchanges have been shut down, running afoul of SEC regulations. Many traders aren’t too concerned because they believe that institutional investors will fill the gap left by those that fled to more secure platforms. However, this isn’t necessarily true as many institutions are still waiting on regulation before diving into cryptocurrency trading for good.
Institutional investors have been slow to adopt cryptocurrencies, but recent events indicate that they may be coming around. With a steady influx of funds, this will likely push the market higher and provide it with much-needed stability.Institutional investors have been playing a large role in shaping the cryptocurrency market and blockchain technology. Their investment has helped increase awareness of crypto while also fueling growth within the industry. They are crucial partners, but they remain largely silent for fear of public backlash or an unclear regulatory outlook on their part.
The “institutional bitcoin investors list” is a question that has been asked in the cryptocurrency world. The answer to this question is yes, but not all institutions are created equal. There are some key institutional investors who have been very quiet about their investments in the crypto space.
Consider the case when an institutional investor, such as an insurance firm or a pension fund, wishes to test the bitcoin waters. Perhaps a huge firm wants to diversify its treasury assets by purchasing Bitcoin (BTC). They’re not likely to declare their intentions ahead of time. This might cause the price of the digital item they’re seeking to purchase to rise.
As a result, there’s sometimes a gap between a huge institution’s move — say, buying $100 million in Bitcoin — and its public statement. “Institutional involvement comes in cycles,” said Diogo Mónica, co-founder and president of crypto custody firm Anchorage Digital. “By the time you hear about a new corporation embracing cryptocurrency, we’ve usually been talking to them for months.”
Has something similar happened during the latest price surge, when Bitcoin, Ether (ETH), and a slew of other cryptocurrencies hit all-time highs? Were companies and institutional investors secretly buying crypto in the early autumn to avoid raising the price while they were in the accumulation period, with the effect just becoming apparent this week?
So, where do the biggest investors come from?
“Institutions have clearly been launching or increasing Bitcoin allocations lately,” said Kapil Rathi, CEO and co-founder of institutional cryptocurrency exchange CrossTower. He admitted that some of it started in early October, when significant investors were likely seeking to get in before of the ProShares exchange-traded fund (ETF) debut — and that it subsequently turned into a seller following the launch — but that “there has been substantial passive support that has kept prices constant.” In terms of execution, this purchasing support has resembled institutional accumulation rather than individual buying.”
“As we can only rely on institutional investors telling us if they have purchased our ETPs,” James Butterfill, investment strategist at digital asset investing platform CoinShares, cautioned, “we are seeing an increasing number of investment funds get in contact to discuss potentially adding Bitcoin and other crypto assets to their portfolios,” he told Cointelegraph.
“Two years ago, the same funds believed Bitcoin was a crazy notion; a year ago, they wanted to talk about it more; and now, they’re worried they’ll lose customers if they don’t invest.”
“The major investing reason seems to be diversification and a monetary policy/inflation hedge,” Butterfill noted.
According to Lennard Neo, head of research at Stack Funds, “we do see an increase in risk appetite and interest, particularly so for specific crypto sectors — NFTs, DeFi, etc. — and broader mandates outside of just Bitcoin.” This participation may not be from the most traditional of institutional investors — i.e., pension funds or insurance companies — but skewed more toward family offices and funds of funds. He told Cointelegraph that Stack Funds is receiving two to three times as many inquiries from investors as it was in the third quarter.
Why now?
What’s the deal with the apparent uptick in institutional interest? There are a variety of causes, according to Neo, ranging from “speculative to those who seek to hedge against global macro risks.” However, a number of people have lately said that “blockchain and crypto are becoming a fundamental element of a global digital economy.”
“Whereas in the past, crypto investments were a risk for managers — it could go wrong,” Freddy Zwanzger, co-founder and chief data officer of blockchain data platform Anyblock Analytics GmbH, told Cointelegraph, “now it increasingly becomes a risk not to allocate at least some portion of the portfolio into crypto, as stakeholders will have examples from other institutions that did allocate and benefited.”
The fact that major financial institutions like as Mastercard and Visa are starting to embrace crypto on their networks and are even acquiring nonfungible coins has only added to the FOMO, according to Zwanzger.
“Institutional and family office interest has been progressively increasing throughout the year,” Vladimir Vishnevskiy, director and co-founder of St. Gotthard Fund Management AG, told Cointelegraph. “The approval of the BTC ETF in October further exacerbated this trend, since getting this exposure is now much simpler.” Many institutional investors are concerned about inflation, “and crypto, along with gold, is considered as a decent hedge for this.”
Cryptocurrency is being considered by public corporations for their balance sheets.
What about businesses? Is it true that more companies are buying Bitcoin and other cryptocurrencies for their treasuries?
Brandon Arvanaghi, CEO of Meow, a company that allows corporate treasuries to participate in crypto markets, told Cointelegraph that he is witnessing a shift in corporate CFOs’ attitudes about crypto, especially in the aftermath of the worldwide pandemic:
“When inflation is at 2% and interest rates are at a fair level, corporate treasurers don’t consider other investments.” […] COVID turned the world upside down, and inflationary pressures are forcing corporate treasurers to look for alternate income sources not merely willingly but aggressively.”
“From our perspective, more firms are buying crypto to diversify their corporate coffers,” Mónica said. Furthermore, “Banks are reaching out to us to satisfy the demand for these sorts of services,” indicating a larger trend than enterprises adding cryptocurrency to their balance sheets. […] It implies that, in the not-too-distant future, more individuals will be able to access cryptocurrency directly via the financial tools they presently use.”
According to Marc Fleury, CEO and co-founder of fintech startup Two Prime, macro factors are prompting corporations to incorporate bitcoin to their balance sheets. “When you consider that liquid corporate cash for publicly listed firms in the United States has increased from $1 trillion in 2020 to $4 trillion in 2021, it’s easy to understand why many corporations are seeking for new ways to invest their cash, and why this trend isn’t going away.”
Meanwhile, according to Butterfill, the number of publicly listed corporations holding Bitcoin has increased from 14 this time last year to 39 now, with a total value of $13.7 billion.
Are more businesses willing to accept cryptocurrency as a form of payment for their goods and services? Tesla was recently speculated to be on the approach of accepting Bitcoin as a form of payment for its vehicles (again).
“Fintechs are reaching out to us to assist them accept not just Bitcoin, but a range of digital assets,” Mónica told Cointelegraph, “suggesting that huge corporations are becoming more inclined to embrace crypto payments in the larger scheme.”
Fleury, for one, doubted that cryptocurrencies would ever be extensively utilized as a means of trade, with the exception of stablecoins. “Volatile cryptos, such as Bitcoin and Ethereum, are not suitable for payments.” “Period,” Fleury said. “Stablecoins are another matter,” he added, adding that “what makes crypto fantastic as a reserve currency makes them bad money of exchange practically by design.”
Is the stock-to-flow strategy a viable option?
The so-called stock-to-flow (S2F) model for forecasting Bitcoin prices has gotten a lot of attention in the crypto world. Indeed, by the end of November, anonymous institutional investor PlanB’s S2F model anticipated a BTC price of >$98,000. Is the stock-to-flow strategy taken seriously by institutional investors?
“Many institutional investors ask us this question,” Butterfill said, “but when they go further into the model, they find it to be untrustworthy.” Stock-to-flow models often project future data points beyond the present data range of a regression set, which is a statistically problematic technique.
Furthermore, the method of comparing an asset’s existing supply (“stock”) with the amount of new supply entering the market (“flow”) — such as through mining — “certainly hasn’t worked for other fixed-supply assets like gold,” according to Butterfill, who added, “In recent years, other approaches have been made to enhance the S2F model, but it is losing credibility with clients.”
“I don’t believe institutions pay too much attention to the stock-to-flow model,” Rathi concurred, “but it’s difficult to criticize it since it has shown to be pretty accurate so far.” It seems to be more popular among retail traders than among institutions, according to him. On the other hand, Vishnevskiy was not so quick to discount stock-to-flow analysis:
“This approach, along with 40+ additional indicators, is used by our fund.” It’s an excellent model, but it shouldn’t be utilized by itself. It must be used in conjunction with other models, as well as the fundamentals and technical indications.”
Who is pushing up prices if not institutions?
Given that institutional involvement in the recent crypto run-up seems to be primarily anecdotal at this time, it’s worth asking: Who is swallowing the majority of the bitcoin floating around if companies and institutional investors aren’t?
“It’s understandable that this has been a retail-led phenomena,” Butterfill said, “because we’ve seen the birth of a new asset class, which comes with misunderstanding and reticence from regulators.” He said that regulatory uncertainty continues to be a deterrent to institutional engagement.
“Regulations and business limits were the most often mentioned reasons for not investing in our most recent poll. In comparison to asset managers, those entities with significantly more flexible mandates, such as family offices, have much greater roles.”
Despite the dearth of hard evidence, many think institutional engagement in the digital asset market is increasing. “As crypto security, technological infrastructure, and legal clarity have improved over time,” Mónica told Cointelegraph, “it’s opened the door for larger institutional engagement in the industry.”
“Many payment rails, like stable currencies and DeFi, will be available via crypto in the next years.” I also foresee increasing interoperability between blockchain-based payment rails and classic payment rails.”
Fleury sees a strong pattern. “In the next cycle, pension funds, endowments, sovereign funds, and the like will include crypto in their portfolios.” They are, however, careful investors, and doing the requisite due diligence takes time.
Related: Crypto and pension funds: A match made in heaven, or not?
However, he warned, once institutional investors commit, they tend to cut down their investments quickly. “This institutional cycle is still in its early stages.” Pension funds will show a lot more interest.”
A single $1-billion crypto transaction, such as the one that broke the record in late October, will be a “daily event” at that time, according to Fleury.
The “who owns the most bitcoin 2021” is a question that has been asked by many people. The answer to this question, is that institutional investors are the key silent partners of crypto.
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Frequently Asked Questions
Do institutional investors control the market?
Why are institutional investors important?
A: Institutional investors are important because they have more money to invest. This means that there is a higher chance for the company you work at or want to invest in, to get funding and expand their operations.
Who invests in institutional investors?
A: Institutional investors are companies that invest in other companies. The most common types of institutional investments include stocks, bonds, and funds.
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