At present, Bitcoin may be a store of value for a few people, as a means of hedging inflation or a “digital gold” recognized by many people. The institutionalization of assets has made it clear that one thing is that Bitcoin is not suitable for retail investors, and it may mean different things to different people. It may be an asset class, such as a commodity, a legal medium of exchange, or a constant record of the rights and ownership of others.
Bitcoin is not a solution to problems, but a number of practical challenges in the traditional financial and economic fields.
It has become an investable asset class other than gold, and although Bitcoin’s volatility has become an important limitation of assets, it is no longer the focus of attention.
In the case of institutional investment or hedge fund preference, Bitcoin will check all the boxes in the product market suitability. This may be the main reason why SCVentures and Northern Trust reached an agreement to start ZordiaCustody. And why Mass Mutual recently bought $100 million in Bitcoin.
Bitcoin’s double-digit ROI and rapid growth have proved that it is better than other existing technologies, assets, financial products and services.
Due to lack of infrastructure, institutions avoided Bitcoin in 2013, however, they now expect demand to be fluctuating and may eventually stabilize as the market matures. More importantly, compared with traditional assets, cryptocurrency began to appear at the other end, that is, retail transactions first appeared, and then institutionalization. When institutionalization began, we had to start thinking about a problem: retail traders still How many bitcoins are left and what is the bitcoin price controlled by the institution?
This is the timetable for the rapid institutionalization of Bitcoin over the years. It may be a bit imperfect, but compared with the first Bitcoin ETF proposed by the Winklevoss twins, it has actually come a long way, and the exchange is rejected every day Institutions that inject hundreds of millions of dollars in assets.
Institutions such as PayPal and other credit card companies have begun to compete in the remaining limited supply. The price trend since August 2020 is mainly driven by institutions, and this trend can be clearly seen in the daily announcements of cryptocurrency Twitter.
In order to see this in perspective, consider the fact that GrayScale purchased 71,000 bitcoins on behalf of customers and investors, which is almost 8 times the number of bitcoins mined the day before. Such a rapid acquisition of bitcoin has caused retail traders to speculate about the impact of large-scale selling or falling prices.
Although it is not known on which exchange the institutions are selling, the demand they generate has absorbed the miners’ bitcoins. If the demand generation is left to retail traders, under the current volatility and momentum, it will be a daunting challenge for the price of Bitcoin to exceed $20,000.
The main factors that promote the institutionalization and interest of hedge fund managers and family offices are information asymmetry, improper supervision and inefficient transaction execution on most platforms. Information asymmetry gives institutions a huge advantage, because “quiet weekends” get rid of weak hands. In most cases, even a 15% price drop will trigger a sell-off.
Retail traders are sensitive to factors such as Bitcoin’s social class, while financial institutions are looking at future rewards-their accumulated average price is $19,400 per Bitcoin, and in some cases even higher.
One of the several purposes of Bitcoin was to free retail or personnel from centralized entities or third parties, but the current pace of institutionalization suggests that the game may be over before it starts. Various institutions may have seen Bitcoin as the only solution to hyperinflation, the immigration crisis, and the devaluation of the world’s reserve currency, the dollar.
The threat of the global banking crisis and financial depression is engulfing us, and financial institutions continue to change their position on Bitcoin, soften Bitcoin, accumulate Bitcoin, and push retail Bitcoin aside.
The total market value of Bitcoin is almost the same as that of several technology stocks in the S&P 500 Index, which makes it relatively easier for Bitcoin to be acquired, dominate or influence price trends. The halving mechanism designed to protect gold from hoarding may work contrary to our intuition. It makes assets scarce enough to remind financial institutions of the gold fractal in the 1970s and the possibility of price explosions when supply dries up.
The institutionalization of Bitcoin has changed the prospects of the market, but it cannot be concluded that this is also in the best interests of retail traders.
