Large corporations and financial institutions consider the crypto ecosystem to be risky. Some have generally viewed it with skepticism. But since 2020 these institutions have changed their perception and now look at it as a digital asset. This is because the COVID-19 pandemic has led to a global lockdown and has had a significant impact on businesses. Governments had to take economic stimulus measures and reduce interest rates to almost zero. People always choose to invest with reliable trading platform like bitcoin immediate edge
Perhaps, the effects of the COVID-19 pandemic sparked institutional interest and changed business leaders’ perception of cryptocurrencies. The narrative of bitcoin has turned into an inflationary hedge, with some calling it digital gold. The halving in May 2020 reinforced this change in sentiment. Furthermore, the 2021 crypto bull run changed the perception when the bitcoin price hit an all-time high of $65,000 in April and $69,000 in November.
But things have not been solid for the bitcoin market. After the cryptocurrency hit an all-time high, it lost nearly 55% in value, hitting a low of $30,000 in July. The market capitalization of the cryptocurrency also fell to around $1.199 trillion. Subsequent crashes caused a further drop in bitcoin’s market cap. Nevertheless, institutions continue to invest in this virtual currency despite the ups and downs. Here’s how institutions invest in bitcoin.
Some institutional investors view bitcoin as a digital asset. In that case, the cryptocurrency has seen a significant, rapid increase in value and interest over the years. According to some investors, bitcoin represents a modern asset class that will find widespread acceptance. Some experts argue that major players in the crypto industry will move to specialized use cases such as NFTs and De-Fi. Currently, most of these investors are looking for bitcoin exposure.
Some experts argue that bitcoin plays an important role in asset portfolio management, which involves its use to achieve diversification and enhance returns. Currently, some researchers note that institutions with crypto investments tend to perform better than those without them, which means they can multiply their investments.
Unprecedented events like COVID-19 and the war in Ukraine are some of the things that could lead more companies to invest in bitcoin. Thus, institutional investment may increase as more businesses learn about bitcoin.
transaction with bitcoin
In addition to adding bitcoin to their asset portfolios, more institutions are accepting bitcoin payments for services and products. The payments giant and financial gateway makes it easy for its customers to transact with bitcoin.
A growing number of institutions across a variety of industries, including tech, airlines and financial service providers, allow customers to use bitcoin on their platforms. For example, its mobile subsidiary PayPal and Venmo added bitcoin services in 2020. The company announced a service that enables users to buy, hold or sell bitcoins.
There has also been an increase in non-reliable ETP flows. These investment products are attracting more institutional investors in Europe and Canada who want exposure to cryptocurrency without having to manage their own assets. For example, institutional investors can trade bitcoin derivative futures on the Chicago Mercantile Exchange. As of May 2021, Bloomberg reported that the Bitcoin ETP was valued at $6.9 billion.
While this may be just a drop in the ocean with respect to the entire asset management sector, future regulations may boost institutional adoption of the sector.
Despite the volatility in the price of bitcoin, more institutional investors are looking to buy, hold or trade this cryptocurrency. Perhaps, this is because bitcoin has shown an ability to withstand economic turmoil as it did during the Covid-19 pandemic. Research shows that more institutions continue to buy dips, especially on the heels of China’s sanctions. Furthermore, the Russian-Ukraine war and high interest and inflation rates have boosted bitcoin adoption by institutions.
Credit : newsbtc.com