Starting from 2021, when Bitcoin hit its highest value ever, surpassing $64,000 in November, it has become a popular choice for institutional investors.
Many companies are now getting involved in the crypto world, either through specialized institutional crypto trading platform services or by using investment tools like exchange-traded funds (ETFs). Today, we will discuss how crypto institutional adoption affects the development of the crypto market.
Crypto Institutional Trading and Investment – The Most Prominent Players
The world’s giants Tesla and MicroStrategy have become the largest Bitcoin investors. Morgan Stanley and Goldman Sachs were among the first financial companies to adopt crypto assets in 2021. It is estimated that over the next 5 years, hedge funds will hold $312 billion in crypto assets, which is roughly 7% of their total holdings.
The most popular way for institutions to enter the crypto space is by buying and holding Bitcoin. However, some financial entities engage in active trading and become crypto liquidity providers (Alameda Research, Cumberland, GSR).
Consequences of Institutional Crypto Adoption
Here is how the crypto sector has changed with the growth of institutional interest:
- The rise of institutional exchanges. There are institutional-grade platforms, providing all these services and more to large players. An example is the WhiteBIT institutional crypto exchange or Binance. By opening a crypto institutional account, companies receive benefits such as sufficient liquidity, market-making programs, security, reporting tools, etc.
- Institutional adoption contributes to market maturity by reducing volatility and consolidating liquidity. Institutional investments play a central role in lowering volatility, and it becomes possible due to ETFs. Those funds encourage a greater number of long-term crypto holders, which, in turn, makes the market more stable and less volatile. The first Bitcoin ETF “BITO” started trading in October 2021 in the U.S.
- Fidelity has revealed plans to introduce a retirement savings option that includes Bitcoin. It will allow people to invest in BTC as a part of their retirement portfolio. This announcement has sparked discussions regarding Bitcoin and its market’s role as a store of value. In turn, it raises discussions among regulators seeking a clearer path forward into the future. Crypto needs a more educated regulatory framework, and it is ongoing and constantly updated. When it’s ready, the world will have a clear regulatory picture for institutions that plan to invest in crypto.
Without a doubt, the increasing adoption of cryptocurrencies will lead to the emergence of more trustworthy platforms for institutions, crypto-related products, and clearer rules in the industry. This, in return, will draw in more investments in the sector.