Bitcoin prices continue hovering around the $40,000 level, sparking some concern that more near-term downside is a possibility. However, there’s evidence suggesting that institutional investors remain pivotal participants in the crypto market.
That’s an encouraging sign for assets such as the Grayscale Bitcoin Trust (GBTC). GBTC is an index fund designed to provide exposure to spot bitcoin prices. Previously, bitcoin prices got a jolt from institutional investors, but that catalyst faded. Some analysts believe that it could be reborn.
Ki Young Ju, CEO of on-chain analytics platform CryptoQuant, expects that the catalyst will reemerge, and that could provide support to the prices of the largest digital currency and GBTC.
“Ki highlighted figures from Coinbase Pro, the professional trading offshoot of United States exchange Coinbase, that confirm that large tranches of BTC continue to leave its books,” reports William Suberg for Cointelegraph. “Those tranches totaled 30,000 BTC in a single day this week, and the event is not an isolated one, with March seeing similar behavior.”
While bitcoin and other digital currencies have long been popular with risk-tolerant retail investors, institutional participation in this arena is vital because it brings credibility to what’s still a new asset class. Additionally, institutional investors have the capabilities to affect the bitcoin market’s supply and demand dynamics.
“Last month’s executive order from United States President Joe Biden, designed to investigate various aspects of the cryptocurrency ecosystem, has seemingly not deterred large-volume investors looking for exposure,” according to Cointelegraph.
Crypto market observers also estimate that increased institutional participation in this market can potentially propel bitcoin to comparable trading volume to stocks in the years ahead.
Speaking of equities, something that could add to the allure of bitcoin for institutional investors is the largest digital currency breaking its recently tight correlations with stocks. Those correlations prompt some market participants to view bitcoin as a risk asset, but if that status fades, more investors could be drawn into crypto as a portfolio diversification avenue.
“Bitcoin’s correlation to equities, themselves at the mercy of central bank policy, needs to break in order for conditions to improve, but analysts say that the process will be anything but smooth when it happens,” notes Cointelegraph.
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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.