It can be seen that institutional investors are rapidly pursuing bitcoin (BTC) and several companies are looking to use bitcoin as a way to store their reserves. Marathon Patent Group, a Nevada-based bitcoin mining company, recently acquired $ 150 million of bitcoin as a reserve, a similar move for MicroStrategy to buy $ 425 million bitcoin in September 2020. This acquisition makes Marathon Patent Group the third largest BTC owner among traded companies.
In addition to Marathon, BlackRock, the world’s largest asset manager by virtue of assets under management, stated in its new files to the US Securities and Exchange Commission that bitcoin derivatives could now be part of the investment plans of two fund partners: BlackRock Global Allocation Fund Inc and BlackRock Funds. This is sure to set a precedent for other big asset management firms like Vanguard, UBS Group, State Street Advisors, and more to enter the crypto investment space.
According to research by technology researcher Kevin Rock, listed companies hold more than $ 3.6 billion in bitcoin, up 400% over the past 12 months. In 2019, the portfolios of these companies had just under 20,000 BTC, and now their number has grown to 105,837 BTC, with the largest owners being MicroStrategy, Galaxy Digital and the Marathon Patent Group. Institutions are now involved in the bitcoin market as some expect bitcoin to become a digital alternative to gold.
2020 Rally Brings BTC FOMO to Institutional Investors
Bitcoin price jumped from $ 7,250 in early 2020 to a permanent high of $ 41,940 on January 9 this year. This jump required investors to generate a 303% return on their Bitcoin investments during 2020. These returns have far outstripped market indices such as the S&P 500, Nasdaq Composite and Gold.
Such abnormally high Bitcoin returns have left institutional investors wary of getting lost, especially after several well-known traditional financial companies suggested that Bitcoin could hit $ 100,000 later this year. “BTC is widely recognized as an asset in its own right,” Scott Freeman, co-founder and partner of JST Capital, a digital asset company for institutional investors, told Cointelegraph that “BTC is widely recognized as an asset in its own right. on the right, adding: “Money that has lost growth in 2020 is pushing investors to do so. Assets.”
In addition to the high returns that Bitcoin and other cryptocurrencies have provided through 2020 and will continue into 2021, institutional investors want to use Bitcoin to hedge risks from other assets in portfolios with low correlation with cryptocurrency markets.
“Cryptocurrencies have a higher practical value than gold,” Sergey Zhdanov, CEO and CFO of the UK-based cryptocurrency exchange EXMO, told Cointelegraph. He also noted that this “confirms the fact that cryptocurrencies have the opportunity to develop their application properties (means of payment and trading), and not just investments.”
An example of organizations using bitcoin to hedge their portfolios, when Ruffer Investment announced to its investors that they now own 2.5% of the portfolio in BTC, indicating that “we see this as a small but solid insurance against continued currency depreciation. … … Of the world’s largest currencies. ”
Are you still one of the early adopters or survivors?
Now that so many institutions are buying bitcoin and other crypto assets, it can be argued that these investors are a little late to the party and are buying assets at a higher price than they would have if they had accepted the crypto world just a year ago. That said, Simon Peters, a market analyst at eToro, a social trading and brokerage company with multiple assets, told Cointelegraph:
“Institutions that buy bitcoin now and store it as a fallback strategy can be considered pioneers when it comes to companies. In the months and years ahead, investors will see the beginning of 2021 as a good time to get involved in cryptocurrencies. playing fields to which others can join. ”
Buying bitcoin and storing it as a reserve currency for your portfolios in addition to traditional assets is just the first step towards widespread adoption. As these institutions become more aware of digital assets, they will dig deeper into other ways to use them, such as payments, transfers and settlement purposes, according to Peters, who added: “We can even see central banks holding bitcoins if it grows into a global reserve digital currency. ”