Institutions appear bullish on cryptocurrencies despite record Bitcoin outflows

BTC represents over 44% of the total market capitalization of digital assets of $ 2 trillion, while Ethereum represents around 18%. In May, the number of addresses holding more than 1,000 BTC fell to around 2,100 from 2,500 in February, according to blockchain data analytics firm CoinMetrics. However, most indicators show that institutions are increasing their overall holdings. From Wall Street hedge funds to big banks, large-scale investors are riding the crypto train. Bitcoin’s drop from its all-time high of $ 65,000 has cast doubt on the minds of all cryptocurrency investors, although that may change as its price has since started to recover.

“Due to its architecture, DLT operates in a unique way that differs from the established IT and financial product infrastructure. It would definitely require some tweaking and updates in order to bring more entities into crypto. He further added:

According to Nikita Ovchinnik, director of business development for the decentralized platform 1inch Network, “There is no doubt that institutional investors have a long-term bullish approach to crypto and Bitcoin in particular.” In the long run, he also said the biggest hurdle for institutions will lie in the technology itself.

“The number of institutional investors exposed to crypto has grown dramatically over the past year, and they haven’t come for short-term gains.”

International investment banks and financial services firms like Morgan Stanley, BlackRock, Goldman Sachs, and JP Morgan have all set up Bitcoin-related services and funds in recent months. After peaking at $ 40 billion in April, Grayscale Bitcoin Trust, one of the largest institutional investors in the space, reported that its total assets under management fell to $ 20 billion in July. before climbing back to nearly $ 41 billion in the midst of the recent rally.

With concerns of a regulatory crackdown on digital asset exchanges and service providers, along with China’s stance on Bitcoin trading and mining, there are enough reasons for mainstream investors hesitate to enter the market. However, the recent pullback above the psychological $ 40,000 mark could be a sign that sentiment is recovering. The real question is, what will institutions do next?

ETH and flux

In mid-August, Bitcoin announced its sixth straight week of institutional exits, with over $ 22 million in liquidations in a single week. This is the longest release period for digital asset since 2018. Nonetheless, total assets under management for digital asset investment products increased by 10% in the same week, although this is mainly due to price appreciation.

One of the main reasons investors have flocked to Bitcoin over the past two years has been the rising inflation rate of the US dollar. Amid the current COVID-19 crisis, the United States Federal Reserve has printed trillions in the name of stimulus checks, prompting affected investors to look for other places to park their capital.

In contrast, multi-asset products appear much less uncertain about their direction, with institutional investors increasing their holdings by $ 7.5 million and attracting nearly $ 12 million through fundraising last month. In contrast, over the same period, Bitcoin funds recorded nearly $ 68 million in cash outflows.

All of this indicates that institutions are diversifying their holdings into digital assets other than Bitcoin, with altcoins like Ethereum, Cardano (ADA) and Binance Coin (BNB) also experiencing an increase in inflows. While BTC outflows may be higher than ever, institutional investments in digital assets are higher than ever this year.

“The undeniable model is that institutional interest and participation in the field continues to increase,” said Jack Tao, CEO of Singapore-based cryptocurrency exchange Phemex in a conversation with Cointelegraph, adding: “C It is despite periods of high volatility that crypto veterans are used to but may be undesirable for traditional investors.

He also said that the DeFi space is still in its early stages of adoption and that while some technologies and applications are already in place, we are still only seeing the tip of the iceberg. “Smart institutional investors may sense the coming change and wish to clearly position themselves as beneficiaries of what is to come,” he said, adding: “The end use cases that blockchain will address do not have not even imagined yet. “

Investing in digital assets as an institution is very different from shopping at retail. Although most crypto-positive institutions already trade in the forex markets, they face very different risks than traditional systems. Finding differences in spot prices can become a costly ordeal, and as they end up trading with unknown counterparties, factors like technological reliability and depth of liquidity are much more critical than usual.

“There is still a long way to go,” Daniel Santos, CEO of Woonkly Labs Automated Market Maker, defi.finance, told Cointelegraph: “[Institutions] not only need regulated products, but also products that are easy to use and specifically tailored to their needs. He added:

“DeFi is attracting a lot of attention,” said Yves Longchamp, head of research at SEBA Bank, a digital asset bank approved by FINMA. As Longchamp told Cointelegraph, institutional investors focus on three main factors, including adding yield to their portfolios – a source of income that does not exist in traditional finance.

“Institutions are looking for products that allow them to invest in DeFi in complete security and serenity. I think they take a long term approach and are optimistic.

While it appears that big capital is entering the industry with confidence, bringing their capital into the space, price appreciation may take a back seat as regulation becomes a bigger concern for institutional investors.

Despite constant Bitcoin exits, institutions seem more optimistic than ever about the digital asset space. Recently, the global network of professional financial intermediaries, TP ICAP, announced that it will launch a cryptocurrency trading platform with industry giants Standard Chartered and Fidelity Investments.

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