Bitcoin, the largest digital currency by market value, continues notching record highs on what feels like a daily basis.
Chances are institutional investors are playing a vital role in this rally because confirmation abounds that Bitcoin is luring more and more big-name participants.
“Following moves by firms such as Tesla, Visa and Mastercard to incorporate bitcoin into their payments infrastructure, institutional banks appear to be getting in on the bitcoin act,” according GlobalData, a leading data and analytics company. “This marks the beginning of a new era for bitcoin – a distinct shift away from a cryptocurrency driven by retail investors to one with more mainstream adoption.”
Why the Institutional Allure?
Supply of Bitcoin is dwindling because institutional investors are piling into the market and many retail investors are holding onto the cryptocurrency for longer periods of time.
Asia is seeing particular interest in rising institutional investment. China is working on a state-backed cryptocurrency offering with the help of major private industry players.
“Big names from BNY Mellon to Anthony Scaramucci’s Sky Bridge Capital, which has pumped almost $500m into bitcoin over the past five months, are adopting the cryptocurrency. Furthermore, Morgan Stanley is weighing up whether to bet on bitcoin and JP Morgan will look at offering bitcoin trading if there is client demand. These banks and large companies are interested in bitcoin for good reason – aside from the hype,” notes Global Data thematic analyst Danyaal Rashid.
Amid low global interest rates and central bank debasement of fiat currencies, Bitcoin is becoming a go-to asset for some high-level investors and companies.
“In an era of 0% interest rates, money kept on companies’ balance sheets is earning no return. Bitcoin can provide a much better source of return if companies want to diversify their holdings,” concludes Rashid. “This is even more relevant given the high levels of liquidity we are seeing. Bitcoin may increasingly be used as a defensive asset to hedge against inflation and forex volatility, essentially making it digital gold.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.