Bitcoin was created over a decade ago and remained quite popular among certain subgroups in the tech and gaming communities, but didn’t gain mainstream popularity until a few years ago. It has come a long way from being associated with illegal activities, for example, being used in the infamous dark web site, Silk Road, the first modern-day darknet marketplace — to being used as a legitimate payment method by some of the largest companies on the planet, including AT&T. In just over a decade, blockchain, the underlying technology behind Bitcoin, has given rise to a new category of financial instruments: cryptocurrencies. Over the years, we have seen a greater push for mainstream adoption of cryptocurrencies. If the ICO boom was the buzz around town in 2017, and the bear market was prominent in 2018, institutional investment in the crypto industry is definitely the theme for 2019.
The ICO frenzy: First Major Wave in Crypto Adoption
The Initial Coin Offering (ICO) frenzy in 2016 and 2017 remains a very significant event in the cryptocurrency industry to date. Initial coin offerings, through the help of blockchain, allowed thousands of companies to raise funds from the general public rather than going the more traditional route of institutional investment or venture capital. To date, ICOs represent the most prominent use case of cryptocurrencies and smart contracts on the blockchain: fundraising. Within a span of two years, this use case brought in hundreds of thousands of people into the cryptocurrency space. By December 2017, the Bitcoin price had soared to almost $20,000 and the cryptocurrency market cap crossed the $800 billion mark. What was most interesting about this rally was the fact that up until then, institutional involvement in cryptocurrency investing was minuscule. And while ICOs managed to entice some, most people remained sceptical as the space still lacked a high degree of genuineness and accountability, bringing us to the next development in the space. After the 2018 bear market, companies are now focused on building products and services, with some shifting their focus to institutional investors.
Institutional Investors: The Need of the Hour
Institutional investors have remained the “gold standard” in determining the quality of investments. Institutional investors control large chunks of financial assets and have substantial resources at their disposal. Over the decades, institutional investors have built a reputation for themselves, since they have had access to companies that an average person does not. The 2013 crypto bubble was driven by technocrats and dark web trawlers, while the 2017 rally was led by speculative retail traders. Several research studies, as well as the involvement of reputable financial institutions deciding to take the plunge into crypto, are popularising the narrative around institutional investment and its potential impact, which is why most companies today believe that the growth in 2020 will be a result of financial institutions which are diversifying their portfolios and adding cryptocurrency trading to the mix.
Fidelity Investments, the financial giant that has over a trillion dollars worth of assets under management, revealed plans to launch its own cryptocurrency division after it saw huge interest from institutional investors and recently managed to receive the trust license from the New York State Department of Financial Services (NYDFS). According to a study conducted by Fidelity, the findings saw that most investors (72%) preferred to buy crypto investment products, while 57% prefered to buy crypto assets directly and another 57% preferred to buy an investment product that comprised digital asset companies.
Another big institutional player that has found its way into the crypto-sphere is Intercontinental Exchange whose long-awaited Bitcoin futures platform, Bakkt, was launched in October. After a very underwhelming start, the daily volume of the futures contract has gone up substantially.
Gradually, we are witnessing the entrance of some of the biggest players in traditional financial markets into the crypto space, and as a result, it has not taken long for the markets to deem that institutional investors will bring in the next wave of the crypto bull market. The question, however, remains: Can institutional investment help in the mainstream adoption of cryptocurrencies?
Read More here: https://www.etoro.com/blog/market-insights/can-institutional-investment-become-a-catalyst-in-promoting-the-mainstream-adoption-of-cryptocurrencies/
The ICO frenzy: First Major Wave in Crypto Adoption
The Initial Coin Offering (ICO) frenzy in 2016 and 2017 remains a very significant event in the cryptocurrency industry to date. Initial coin offerings, through the help of blockchain, allowed thousands of companies to raise funds from the general public rather than going the more traditional route of institutional investment or venture capital. To date, ICOs represent the most prominent use case of cryptocurrencies and smart contracts on the blockchain: fundraising. Within a span of two years, this use case brought in hundreds of thousands of people into the cryptocurrency space. By December 2017, the Bitcoin price had soared to almost $20,000 and the cryptocurrency market cap crossed the $800 billion mark. What was most interesting about this rally was the fact that up until then, institutional involvement in cryptocurrency investing was minuscule. And while ICOs managed to entice some, most people remained sceptical as the space still lacked a high degree of genuineness and accountability, bringing us to the next development in the space. After the 2018 bear market, companies are now focused on building products and services, with some shifting their focus to institutional investors.
Institutional Investors: The Need of the Hour
Institutional investors have remained the “gold standard” in determining the quality of investments. Institutional investors control large chunks of financial assets and have substantial resources at their disposal. Over the decades, institutional investors have built a reputation for themselves, since they have had access to companies that an average person does not. The 2013 crypto bubble was driven by technocrats and dark web trawlers, while the 2017 rally was led by speculative retail traders. Several research studies, as well as the involvement of reputable financial institutions deciding to take the plunge into crypto, are popularising the narrative around institutional investment and its potential impact, which is why most companies today believe that the growth in 2020 will be a result of financial institutions which are diversifying their portfolios and adding cryptocurrency trading to the mix.
Fidelity Investments, the financial giant that has over a trillion dollars worth of assets under management, revealed plans to launch its own cryptocurrency division after it saw huge interest from institutional investors and recently managed to receive the trust license from the New York State Department of Financial Services (NYDFS). According to a study conducted by Fidelity, the findings saw that most investors (72%) preferred to buy crypto investment products, while 57% prefered to buy crypto assets directly and another 57% preferred to buy an investment product that comprised digital asset companies.
Another big institutional player that has found its way into the crypto-sphere is Intercontinental Exchange whose long-awaited Bitcoin futures platform, Bakkt, was launched in October. After a very underwhelming start, the daily volume of the futures contract has gone up substantially.
Gradually, we are witnessing the entrance of some of the biggest players in traditional financial markets into the crypto space, and as a result, it has not taken long for the markets to deem that institutional investors will bring in the next wave of the crypto bull market. The question, however, remains: Can institutional investment help in the mainstream adoption of cryptocurrencies?
Read More here: https://www.etoro.com/blog/market-insights/can-institutional-investment-become-a-catalyst-in-promoting-the-mainstream-adoption-of-cryptocurrencies/
