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Will institutional push help bitcoin become mainstream?

Entry of multinational giants like JPMorgan Chase and Morgan Stanely after Tesla, MicroStrategy, Square in cryptocurrency market may cheer investors and drive demand.

April 28, 2021 / 01:09 PM IST
Representative image. (Source: Reuters)

Representative image. (Source: Reuters)

Talks of JPMorgan Chase offering Bitcoin to its wealthy clients has helped the premier cryptocurrency bounce back from its recent lows. The move will help legitimise the going concern of the virtual currency which has been declared “dead” about 400 times over the past decade.

“The number of such proclamations peaked in 2017, but the trend has been decreasing; 2020 saw the fewest Bitcoin obituary predictions in eight years,” said a Deutsche Bank (DB) Research report released in March this year.

The price of Bitcoin surged almost 10 percent on April 26 to trade at over $53,700, after the report of JPMorgan preparing such a fund.

A single Bitcoin was priced at $1,000 at the beginning of 2017, which scaled to almost $20,000 by the end of that year.


By the end of 2018, it plummeted to around $3,200. The cryptocurrency once again caught the limelight in 2020, amid the COVID crisis, rising over 300 percent during the calendar year.

“One of the most important factors driving bitcoin’s increased demand was the entrance of hedge funds and other institutional investors,” states the DB Research report.

BTC has had a remarkable run this year, doubling in the first three months of 2021 on increasing institutional interest in the asset class. Year-to-date, it is up about 90 percent.

Last month, Morgan Stanely became the first big U.S. bank to offer its wealthy clients access to bitcoin funds, reported CNBC. While Nexon--a video game publisher company acquired 1,717 Bitcoins at an average price of about $58,226 each, recently.

With large institutional investors entering the game and buying the dip, experts suggest that these players are managing to handle the volatile asset with ease.

Read: Here’s how the cryptocurrency works

On April 26, Elon Musk, Tesla’s chief executive officer, said that the electric vehicle maker had sold 10 percent of its bitcoin holdings to prove the cryptocurrency's liquidity as an alternative to cash.



Tesla's earnings statement said that it generated $101 million by selling some of its Bitcoin tokens, which it had purchased for over $1 billion earlier in 2021.

In February 2021, Tesla had invested $1.5 billion in Bitcoin, nearly 8 percent of its reserves, as part of its broad investment policy. The electric vehicle company had said it would soon start accepting Bitcoin as a form of payment for its vehicles.

Like Tesla, a few more publicly traded companies have converted cash in their treasuries to Bitcoin. Here’s a list of such companies holding Bitcoins:

With giants like Tesla, MicroStrategy, Square opting to invest in virtual currencies as an alternative store-of-value for better returns in the long run, this could further add to the confidence of small investors in such financial instruments.

Read: Should you invest in this cryptocurrency?

However, Bitcoin or any cryptocurrency for that matter still has a long way to go due to its low acceptability and tradeability factor in the currency market.

“Bitcoin’s total value is $1,075 billion (as on March 15, 2021) which is around 102 percent of the Yen in circulation, 65 percent of the Euros, 53 percent of the USD, and 904 percent more than the GBP. Yet, the average number of bitcoins exchanged daily in USD is equivalent to only 0.05 percent of the Yen and 0.06 percent of the GBP,” the DB Research report said.

Bitcoin has been highly volatile and this is one of the reasons for it not being accepted widely by traders or in the currency market. However, it has drawn considerable attention and attraction among investors even in India.

Transaction volumes in India are “swelling and eight million investors now hold 100 billion rupees ($1.4 billion) in crypto-investments,” Reuters reported last month based on industry estimates.

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Moneycontrol News
first published: Apr 28, 2021 01:09 pm
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