The backdrop for institutions to adopt Bitcoin has never been better 🚨 This article is 4 years old...
The backdrop for institutions to adopt Bitcoin has never been better
2 min read
Updated: Oct. 11, 2020 at 4:36 pm UTC
Bitcoin has long been a niche asset only adopted by those on the fringes of society. But this is rapidly changing as institutions have started to enter the cryptocurrency space as they see that there is value in owning BTC and other digital assets.
Andrew Kang, the founder of DeFi-focused crypto fund Mechanism Capital, recently broke down why the “backdrop for institutional adoption of Bitcoin” is stronger than ever before.
The backdrop for institutional adoption of Bitcoin is the strongest it’s ever been:
– Low volatility
– Looming inflation
– Low yields
– High valuations in other asset classes
– Price 50% off highs 3 years ago
– Validation from TradFi elite (PTJ)
– Established custody solutions— Andrew Kang (@Rewkang) October 9, 2020
The institutional backdrop for Bitcoin has never been any better
Kang sees upwards of seven reasons why institutions gaining exposure to Bitcoin is making more sense than ever before:
- Bitcoin volatility has declined massively. Volatility is often one of BTC’s characteristics most often cited by traditional investors as reasons to avoid this market.
- There is “looming” inflation, which should drive down the value of the U.S. dollar.
- Yields are low, meaning the opportunity cost of owning Bitcoin goes down.
- Other markets such as the stock market and real estate have extremely high valuations.
- The price of BTC is off 50 percent from its all-time high despite positive macro trends.
- Validation by Wall Street investors and banks.
- Companies are launching “established” custody solutions that should allow notable investors and even retail investors to store their coins at low cost and with little risk of hacking.
It’s happening
It’s no surprise that with this backdrop, institutions and corporations are embracing Bitcoin where possible.
On Thursday, $80 billion financial technology company Square revealed that it had deployed $50 million worth of cash from its balance sheet to purchase Bitcoin for investment purposes. This investment represents one percent of the firm’s assets. Jack Dorsey, who heads both Square and Twitter, has long been a fan of Bitcoin, calling it the internet’s native currency.
Similarly, MicroStrategy, an American business services company, has purchased $425 million worth of BTC for its balance sheet over the past two months.
On Wall Street, there are notable individuals and firms dabbling in the space.
Most notably, billionaire hedge fund manager Paul Tudor Jones announced earlier this year that he would be investing 1-2 percent of his fund’s capital in Bitcoin futures. Echoing the points Kang brought up, Jones said that he was purchasing BTC because he sees immense value in the cryptocurrency during the ongoing macroeconomic turmoil where inflationary trends could take place.
Fidelity, Goldman Sachs, and JPMorgan are among the Wall Street giants that have increased their exposure to the crypto space over recent months.
Bitcoin Market Data
At the time of press 4:36 pm UTC on Oct. 11, 2020, Bitcoin is ranked #1 by market cap and the price is up 0.73% over the past 24 hours. Bitcoin has a market capitalization of $211.42 billion with a 24-hour trading volume of $21.26 billion. Learn more about Bitcoin ›
Crypto Market Summary
At the time of press 4:36 pm UTC on Oct. 11, 2020, the total crypto market is valued at at $358.49 billion with a 24-hour volume of $77.72 billion. Bitcoin dominance is currently at 58.45%. Learn more about the crypto market ›
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Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
JPMorgan
JPMorgan Chase & Co is a global leader in financial services, offering solutions to the world’s most important corporations, governments, and institutions in more than 100 countries.
Fidelity Investments
Fidelity Investments Inc., commonly referred to as Fidelity, is a multinational financial services corporation based in Boston, Massachusetts.
Goldman Sachs
Goldman Sachs a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals.