Over the past several months, institutional investors have held a grand stake in the world of bitcoin. Companies like MicroStrategy, MassMutual and Stone Ridge have all invested hundreds of millions of dollars into bitcoin, and as a result, the currency has ultimately risen beyond the $33,000 mark at the time of writing.
Institutional Investors Are Still a Small Portion of the Trading Population
No doubt that institutions have been playing a huge role in the legitimization of the crypto space. They’ve continued to invest money in the asset and are helping it rise in both price and value. However, according to Jeff Currie of Goldman Sachs fame, institutions – despite all the work they’ve done over the past six months – still hold a rather small position in the crypto arena.
It’s easy to assume that because the companies mentioned above and others like them have invested quite a bit in bitcoin that professional financial players are pushing the digital currency world to the top of the monetary ladder. However, the fact is that the space has still largely been dominated by retailers, and while institutions are potentially beginning to move forward in this respect, they still have quite a way to go before they can catch up.
In a recent interview with CNBC, Currie says:
I think the market is beginning to become more mature. I think in any nascent market you get that volatility and those risks that are associated with it. The key to creating some type of stability in the market is to see an increase in the participation of institutional investors and right now they’re small. Roughly one percent of it is institutional money.
The bottom line is that many cryptocurrencies – including bitcoin – remain extremely volatile. Just recently, BTC was trading for well over $40,000, though as of late, the currency has experienced a loss of roughly $7,000, bringing the asset down to about $33,000. The currency had been surging like there was no tomorrow, but the asset still showed vulnerability to outside market influences – enough to experience its deepest loss in about ten months.
As it stands, many industry experts suggest that institutional investors are necessary to keep bitcoin’s present momentum up. Without institutional investors backing it, bitcoin cannot earn the legitimacy of other payment methods such as fiat currencies and credit or debit cards. The fact is that institutions are beginning to show great interest in the asset, and over time, bitcoin and other forms of crypto could potentially garner top spots in the financial space, but they’re only starting to get heavily involved.
We Need to See More Activity
Currie believes that it will be a while before institutions really see bitcoin as a hedge tool and that we’re only in the early phases. He comments:
That can give [it] some long-run equilibrium.