As the holiday season approaches, anticipation in the cryptocurrency world heightens for the annual phenomenon known as the "Santa rally." Amidst this
As the holiday season approaches, anticipation in the cryptocurrency world heightens for the annual phenomenon known as the “Santa rally.” Amidst this festive period, market dynamics tend to shift. This season, there are several factors that could influence the last few months of the year.
Institutional investment surge
Cryptocurrency prices spiked notably at the end of 2020 and 2021, driven by increased investor optimism and institutional interest. Major financial institutions and hedge funds began viewing Bitcoin (BTC) not just as a speculative asset but as a hedge against inflation and a potential store of value. Large companies like Square and MicroStrategy added major Bitcoin holdings to their balance sheets, further solidifying this image shift.
Additionally, Bitcoin reached all-time highs, igniting a positive sentiment throughout the market. Further, institutional investment was demonstrated when businesses like Tesla made large-scale Bitcoin acquisitions publicly known. Moreover, the introduction of a number of cryptocurrency ETFs and funds gave institutional investors a more convenient and familiar way to access the market.
Firms are catering to institutional investors looking for safe storage options for their cryptocurrency holdings in the quickly evolving financial landscape of 2022 by offering custody services, which are essential for safeguarding digital assets.
Related: Bitcoin is evolving into a multiasset network
Despite some fluctuations, the trajectory was generally upward in 2022. Once skeptical, traditional financial institutions started to provide a variety of crypto services, such as lending, trading, and custody. Institutional actors have also recognized the emergence of decentralized finance (DeFi) and nonfungible tokens (NFTs), particularly venture capital firms and specialized funds searching for novel investment opportunities.
For example, prominent financial institutions collaborated to establish EDX Markets (EDXM), a novel exchange designed for the trading of digital assets through reliable intermediaries. This platform will cater to both institutional and retail investors, ensuring a secure environment for digital asset trading. Noteworthy backers of this initiative included renowned entities such as Charles Schwab, Fidelity Digital Assets, Paradigm, Sequoia Capital, Citadel Securities, and Virtu Financial, reinforcing the exchange’s credibility and strength within the market.
In 2022, despite the crypto winter, development in the crypto sector increased by 5%, indicating sustained interest in underlying technology. Additionally, a 2022 Celent survey revealed 91% of institutional investors are keen on investing in tokenized assets, highlighting strong demand.
The upcoming season might witness an even larger influx of institutional capital into the crypto domain, exemplified by entities like MicroStrategy, which is expanding its crypto holdings by acquiring additional 1,045 Bitcoin for its growing treasury. Also, research by EY-Parthenon reveals that a majority of institutional investors hold a strong belief in the enduring value of blockchain technology and crypto assets, leading them to plan substantial scaling of digital asset investments over the next two to three years.
Moreover, there is a growing interest among investors to participate in tokenized financial assets, prompting institutions to actively explore opportunities to tokenize their own assets in response to the evolving financial landscape. As the industry continues to mature and gain legitimacy, new financial products tailored specifically for institutional investors could emerge, further facilitating their entry into the market.
Regulatory clarity
In 2020, as the cryptocurrency market boomed, it inevitably caught the attention of regulators worldwide. Some nations responded by enacting complete prohibitions, but others adopted a more measured strategy and started the process of developing regulatory frameworks to monitor and control the rapidly expanding domain of digital assets.
In 2021, U.S. regulatory developments — particularly those pertaining to the SEC’s position on cryptocurrencies — became central to the global narrative surrounding cryptocurrencies. The industry was alert due to the ongoing discussions about cryptocurrency regulations and the push for approvals of Bitcoin ETFs. Concurrently, there have been substantial market realignments and conversations regarding decentralization as a result of China’s crackdown on cryptocurrency mining and trading.
The cryptocurrency regulatory environment began to evolve in 2022. After preliminary discussions, a number of nations established precise legislative frameworks with rules governing cryptocurrencies, initial coin offerings (ICOs), and DeFi platforms. At the same time, there was a surge in the global movement to create central bank digital currencies (CBDCs), with many countries introducing or testing their own digital currencies.
This year, significant…
cointelegraph.com
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