Last weekend, Bitcoin flirted with $50,000 for the first time, before giving back some of those initial gains. Some experts believes the next steps for the largest digital asset will include near-term volatility and more price appreciation when that turbulence abates.
The hesitance once seen around cryptocurrencies is slowly starting to dissipate as more institutional investors start taking the assets more seriously. Today, many market observers believe the time is right for institutional investors to get more involved with Bitcoin.
“Morgan Stanley, the investment giant is reported to be considering investing in Bitcoin through its $150 billion investment arm; Elon Musk’s Tesla announced it had invested $1.5 billion in the digital currency and was getting ready to accept it as payment; BNY Mellon confirmed that it had created a digital assets unit to build a custody and admin platform for crypto assets; and Mastercard said it would give its merchants the option to accept cryptocurrencies later this year,” according to the deVere Group CEO Nigel Green.
While Bitcoin retreated from $50,000, one of the obvious historical lessons with the cryptocurrency is that its slumps, which are often nasty, usually give way to significant upside.
Why Bitcoin Bets Are Still Valid
Institutional investors are playing increasingly prominent roles in the Bitcoin market.
“There is a clear direction of travel: institutional investors are taking Bitcoin more and more seriously as a financial asset and a medium of exchange. They are increasing their exposure to it at a faster rate than ever before,” says Green.
Asia, in particular, is seeing strong interest in the rising institutional investment. China is currently working to introduce its own state-backed cryptocurrency, with the help of major private industry players.
Supply of Bitcoin is dwindling because institutional investors are piling into the market and many retail investors are holding onto the cryptocurrency for longer periods of time.
“With the growing institutional demand combined with ultra-low interest rates, we can expect Bitcoin – which has already given a 55% return so far year to date after the 300% gain in 2020 – to reach new highs in this first quarter of 2021,” concludes Green. “However, with increasing dominance and value, comes increasing regulatory scrutiny. Bitcoin and other cryptocurrencies will come under the spotlight from watchdogs like never before and this can be expected to create volatility in the market.”
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