As big players continue to enter the crypto space, institutions are becoming mega HODLers.
Without a doubt, Bitcoin (BTC) has become an increasingly popular asset among institutional investors. At the end of the second quarter of 2020, Fidelity reported in a survey of nearly 800 institutional investors that 36% owned crypto assets. In another survey, conducted by the crypto asset insurance company Evertas, it was shared that respondents believe that hedge funds will dramatically increase their holdings of crypto assets. It also projected that 90% of institutional holders of crypto assets expect to invest even more in Bitcoin next year.
From MicroStrategy and Grayscale to JPMorgan and Goldman Sachs, Bitcoin Loophole has consolidated its place in investment portfolios as the asset to keep as a hedge against inflation and currency devaluation. Beyond that, however, there are real technical reasons why institutional investors are becoming increasingly optimistic about Bitcoin, with some predicting that it will reach $1 million by 2025.
While the future value of Bitcoin may remain a topic of debate, the reality is that investors and financial institutions now believe that „having BTC could be less risky than having no exposure to Bitcoin at all. In fact, according to the crypto research firm Messari, more than 81,000 BTCs belong to „the treasures of publicly traded companies.
In total 81,154 BTC, or 0.5% of all BTC in circulation is held in the treasuries of publicly traded companies.
A total of 81,154 BTCs, or 0.5% of all outstanding BTCs, are held in the treasuries of listed companies.
But what drove the 2020 Bitcoin rally, and what are institutional investors seeing in Bitcoin now that they didn’t see before?
The Bitcoin Network without Borders and Blockchain Technology
Bitcoin acts as a non-sovereign currency that is not correlated to other asset classes. For institutional investors, it serves as a diversification tool to hedge against highly correlated markets such as the S&P 500, Nasdaq and the dollar. Two main areas where Bitcoin and Blockchain technologies offer the most value to institutional investors are secure, borderless transactions and access to new opportunities that cannot exist in traditional financial markets.
Bitcoin’s innovative technology, which includes smart contracts, borderless payments, lower fees and faster, safer transactions, is the catalyst that will prepare us for a future where national currencies break out of their current physical form and go digital.
Related: Bitcoin is the best treasury reserve asset mankind has ever had
With U.S. dollar inflation on the horizon, notable investors such as Ray Dalio and Paul Tudor Jones are also beginning to „like Bitcoin more and more“ and have identified it as the „best inflation hedge“ compared to gold and copper. As banks and technology providers continue to invest heavily in research and development projects related to the verification and recording of financial transactions, such as JPMorgan’s new business blockchain and the Onyx digital mint, we will continue to see institutions increase their presence in space.
Introducing quality custody solutions
Custodians are used by financial institutions such as hedge funds and mutual funds, which are required to hold customer assets with a professional custodian for regulatory purposes.
Previously, institutional investors were suspicious of Bitcoin and other crypto-currencies due to the regulatory environment, and until recently, the broader crypto ecosystem also suffered from a serious lack of institutional quality crypto asset custody solutions. With an urgent need for adequate custodians to ensure the growing amount of crypto assets and increased clarity around regulatory guidelines for operating and investing in cryptomonies, an industry of institutional grade custody solutions was born.