Imagine an institutional investor like an insurance company or pension fund decides that it wants to test the cryptocurrency waters. Or maybe a lar
Imagine an institutional investor like an insurance company or pension fund decides that it wants to test the cryptocurrency waters. Or maybe a large corporation is looking to buy some Bitcoin (BTC) to diversify its treasury holdings. One thing they’re unlikely to do is announce their intention beforehand.That could drive up the price of the digital asset they are trying to buy.
Thus, there’s often a lag between a large institution’s action — purchasing $100 million in Bitcoin, say — and its public announcement of such. “Institutional participation flows in cycles,” Diogo Mónica, co-founder and president of crypto custody bank Anchorage Digital, told Cointelegraph. “By the time you’re hearing about a new company adding crypto, we’ve typically been talking to them for many months.”
Has something like that been going on in the recent price run-up — when Bitcoin, Ether (ETH) and many other cryptocurrencies reached all-time highs? Were corporations and institutional investors stealthily gobbling up crypto through the early fall — so as not to raise the price while they were in accumulation phase — with its impact only this week being made manifest?
Wherefore the largest investors?
Kapil Rathi, CEO and co-founder of institutional cryptocurrency exchange CrossTower, told Cointelegraph, “Institutions have definitely been initiating or increasing Bitcoin allocations recently.” Much of it might have begun in early October, he allowed, as large investors were probably trying to get in ahead of the ProShares exchange-traded fund (ETF) launch — and it then became a seller after the launch — but still, “there has been strong passive support that has kept prices stable. This buying support has looked much more like institutional accumulation than retail buying in the way it has been executed.”
James Butterfill, investment strategist at digital asset investing platform CoinShares, cautioned that his firm’s data is only anecdotal — “as we can only rely on institutional investors telling us if they have purchased our ETPs” — but “we are seeing an increasing number of investment funds get in contact to discuss potentially adding Bitcoin and other crypto assets to their portfolios,” he told Cointelegraph, further explaining:
“Two years ago, the same funds thought Bitcoin was a crazy idea; a year ago, they wanted to discuss it further; and today, they are becoming increasingly anxious that they will lose clients if they do not invest.”
The key investment rationale, Butterfill added, “seems to be diversification and a monetary policy/inflation hedge.”
This participation may not necessarily be from the most traditional of institutional investors — i.e., pension funds or insurance companies — but skewed more toward family offices and funds of funds, according to Lennard Neo, head of research at Stack Funds, “but we do see an increase in risk appetite and interest, particularly so for specific crypto sectors — NFTs, DeFi, etc. — and broader mandates outside of just Bitcoin.” Stack Funds is getting two to three times more requests from investors than what it was getting early in the third quarter, he told Cointelegraph.
Why now?
Why the apparent heightened institutional interest? There are myriad reasons ranging from “the speculative to those who want to hedge against global macro uncertainties,” said Neo. But several have recently declared that they viewed “blockchain and crypto becoming an integral part of a global digital economy.”
Freddy Zwanzger, co-founder and chief data officer of blockchain data platform Anyblock Analytics GmbH, saw a certain amount of fear of missing out, or FOMO, at play here, telling Cointelegraph, “Where in the past, crypto investments were a risk for managers — it could go wrong — now it increasingly becomes a risk not to allocate at least some portion of the portfolio into crypto, as stakeholders will have examples from other institutions that did allocate and benefited greatly.”
The fact that large financial companies like Mastercard and Visa are beginning to support crypto on their networks and even purchasing nonfungible tokens has only intensified the FOMO, Zwanzger suggested.
“Interest from institutional investors and family offices has been rising gradually throughout the year,” Vladimir Vishnevskiy, director and co-founder at St. Gotthard Fund Management AG, told Cointelegraph. “The approval of the BTC ETF in October only exacerbated this trend, as now there is a much easier path to gaining this exposure.” Inflation worries are high on the agenda of many institutional investors, “and crypto is seen as a good hedge for this along with gold.”
Public companies looking at crypto for their balance sheets
What about corporations? Have more been purchasing Bitcoin and other cryptocurrencies for their corporate treasuries?
Brandon Arvanaghi, CEO of Meow — a firm that enables corporate treasury participation in…
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