Bitcoin: Where is the next big wave of institutional capital? She might ride soon

Bitcoin remains correlated with stock markets and is testing the upper end of the bull market technical support band, consisting of the 20-week simple trend and the 21-week exponential trend, with a minus of 1.5% today today, while the Dax is a good 2% is in the red and there are also signs of a weak start for the US markets.

This means that the 200-day trend, which is seen as the final hurdle to a technical return to bullish territory, remains a hurdle for now. The trend is currently around $48,000, from where the price initially bounced off late last month.

While the negative factors such as interest rate reversal and regulatory issues are largely priced in, the next positive momentum is still awaited which will restore the markets to bullish momentum. After the last phase of hype at the end of 2020, interest from private investors has recently stabilized significantly in 2021.

The institutional wave is slowly building

One of the biggest hopes remains a big capital rush expected from institutional circles after 2020 and 2021 by some big companies like MicroStrategy and Tesla getting exposure to Bitcoin. However, it is still a long time to come. That there is some movement on this long-term front, however, is demonstrated by recent Reuters analysis of how and in what form the big fish in the US financial sector are slowly but surely reaching out to the sector. .

In terms of custodial services, Bank of New York Mellon announced in February 2021 that it would hold, transfer and issue bitcoin for wealth management clients, according to a Reuters report. Launch is expected later this year. This would be in partnership with crypto infrastructure company Fireblocks. Bank US Bancorp launched bitcoin custody services in October. Bitcoin company NYDIG acts as a sub-custodian for the bank. The services are aimed at institutional asset managers with private funds. Also in March, State Street Corp announced plans to offer cryptocurrency custody services in partnership with crypto infrastructure platform Deutsche Bank also announced plans to develop a cryptocurrency holding and trading service for institutional investors in 2020, adding that it has already completed a proof of concept. In the meantime, a lot has probably happened here too. BNP Paribas also completed a proof of concept with crypto wallet provider Curv in 2020.

In terms of comprehensive wealth management services, a number of large banks have already launched over the past year, including Morgan Stanley, JPMorgan Chase and Wells Fargo, all of which offer their institutional clients a range of products to participate to a range of cryptocurrencies. . According to media reports, Citigroup and Goldman Sachs have already introduced corresponding offers for institutional clients.

Investments by institutional investors are subject to completely different rules and requirements than retail investors, so the enormous lead time the sector needs to make entry possible is unsurprising. However, the interest on this side is definitely there. Current market developments in the face of ever-increasing geopolitical uncertainty and associated dangers to the global financial system, as well as inflation spiraling out of control, make alternative investment options increasingly relevant to hedge against these risks. . Basically, the market capitalization of all assets traded in global financial markets is around $200 trillion. The entire crypto sector accounts for around 0.5% of that, with a market capitalization of just over $1 trillion. If even 5% of the total capital were to be reallocated to the crypto sector in the next few years, this would correspond to a tenfold increase in the market capitalization of the sector.

The wave of adaptation by private investors continues unabated in the background

Although private sector hype has stabilized at the latest as the interest rate rally in financial markets and the associated correction have been priced in, if you look at the big picture, adaptation is progressing from faster and faster.

According to a new survey by US crypto exchange Gemini, nearly half of all crypto-related investors in the US, Latin America and Asia-Pacific have made first-time digital asset purchases in 2021. The survey was conducted among 30,000 people in 20 countries at the turn of the year 2021/22 and shows the rapid growth of the sector in 2021.

In particular, the study shows that the acceptance of cryptocurrencies increases in countries that are particularly affected by inflation. Brazil and Indonesia are the global leaders in crypto adoption, according to Gemini, with 41% of respondents in those countries saying they own crypto, compared to 20% in the US and 18% in the UK.

According to the report, 79% of people who said they owned crypto last year said they chose to buy the digital assets because of their long-term investment potential. People who do not currently own crypto and live in countries that have experienced currency depreciation against the US dollar were more than five times more likely to say they planned to buy crypto to protect against inflation. Only 16% of respondents in the US and 15% in Europe agreed that cryptocurrencies protect against inflation, compared to 64% in Indonesia and India, for example. The Indian rupiah has fallen 17.5% against the dollar over the past five years, while the Indonesian rupiah has depreciated 50% against the dollar between 2011 and 2020.

Only 17% of Europeans said they would own digital assets in 2021, and only 7% of those who do not currently own cryptocurrencies said they plan to buy digital assets at some point.

To some extent, the report highlights the different investment approaches that can be observed in different economic regions of the world towards cryptocurrencies. While investments in western industrialized countries are largely based on speculative reasons, Bitcoin investments in countries with high inflation and economic problems are strongly driven by fundamental reasons to hedge against the ongoing devaluation of their currency. own currency. In view of the inflation in the euro zone and the USA which is racing, the reasons for investing in Bitcoin in Western countries are likely to shift more and more towards the fundamental properties of Bitcoin as an alternative monetary system and protection. against inflation in the months and years to come move. This applies to both companies and private investors.

The entry of major financial players into the sector and the growing global adoption of Bitcoin reinforce the place of cryptocurrency in its portfolio as a complement to stocks and as a long-term protection against the risks of the current monetary system.

By Alexandre Mayer

Cover photo: tungtaechit /

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