During prior bitcoin bull markets, it was often said that institutional adoption of digital assets was a likely factor. With the largest cryptocurrency and its brethren faltering this year, some market participants are wondering if institutional investors are out of the market.
Indeed, bitcoin prices are faltering this year, but there are overt signals that institutional investors remain engaged with crypto. Over the long haul, increased institutional adoption of digital assets could be a positive catalyst for exchange traded funds, including the VanEck Bitcoin Strategy ETF (XBTF), the VanEck Digital Assets Mining ETF (DAM), and the VanEck Digital Transformation ETF (DAPP).
Just this week, there’s evidence that some well-known institutional players are getting involved in the crypto arena.
“Prices held steady even after two big announcements signaling that institutional acceptance and adoption of crypto continues to build in spite of the bear market. On Tuesday, Google announced it would explore using Coinbase’s service for storing and trading cryptocurrencies. On top of that, BNY Mellon said Tuesday that it will add cryptocurrencies to the various assets it holds as a custody manager,” reported Tanya Macheel for CNBC.
Coinbase (NASDAQ:COIN), which operates the biggest crypto exchange, is the largest holding in DAPP at a weight of 8.48%. That ETF holds a variety of crypto-correlated equities, including Coinbase, bitcoin miners, and more traditional though still crypto-exposed fintech companies.
Although it’s positioned as a play on miners of digital assets — and it is — DAM also features exposure to Coinbase. The stock is that ETF’s eighth-largest component at a weight of 4.77%.
Adding to the longer-ranging cases for digital assets and crypto-correlated stocks are other recent instances of institutional adoption.
“In the past month, Nasdaq also launched crypto custody for institutions and Franklin Templeton, Betterment, Société Générale and other wealth managers have made forays into crypto,” according to CNBC.
While these headlines haven’t yet had a material impact on prices of ETFs such as DAM, DAPP, and XBTF, that could be more of a symptom of the macroeconomic environment than a lack of institutional enthusiasm for bitcoin. Translation: Inflation and rising interest rates, which are propelling the U.S. dollar, are among the primary headwinds that bitcoin and its peers are dealing with this year. Despite those headwinds, high-level investors are wading into crypto, and that could be telling for retail investors.
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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.