03 / 03 / 21
The adoption of cryptocurrencies by institutional investors
Cryptocurrencies have hit major milestones in the last decade and despite being intriguing to entrepreneurs and being scrutinized by regulators, their adoption rate has surged. Particularly in 2019 and 2020, the demand for cryptocurrencies from institutional investors increased exponentially, which resulted in the biggest bull run in the history of digital assets.
A couple of years ago, the news for crypto adoption by a major institution would be quite rare to find, due to many reasons. However, in the last two years, we have observed a high wave of such events by renowned institutions, including PayPal and Stripe as well.
To gauge the immense potential in this asset class, it is worth mentioning that towards the end of 2020, the value of gold hit its ATH since 1973, and even then, it gave many folds lesser return than BTC. Therefore, JPMorgan’s analysts made a statement and said that it could take several decades before gold could reestablish itself as the market leader in the finance industry (if at all).
Since cryptocurrencies have started gaining recognition by some of the top financial companies, the data coming from these institutions is also quite promising. For instance, the Grayscale Bitcoin Trust observed an inflow of $2B from October 2020 until December 2020. In the meantime, there was an outflow of $7B worth of gold–backed ETFs. Therefore, it is quite evident that in just a decade, it has started posing an existential threat to the most popular and reliable commodity for centuries.
It is worth noticing that several banks have also jumped on this bandwagon of crypto adoption and ultimately, this is proving quite beneficial for the industry in general and digital currencies in particular.
Just to clear out any misconception, this aggravated trend of crypto adoption is not similar to what we usually observe in the stock market, known as stock buyback, which causes artificial fluctuation in price. It seems way more than that as institutions have started spending a significant amount of funds to not only develop in-house tools but have allocated budgets as well for blockchain and crypto-related R&D. Moreover, many firms have even made their crypto-adoption plans public to gather more traction and stir the market so their competitive firms can also catch the hype and increase the value of the assets as a whole.
Since the developments have been quite fruitful for the internet community and the world’s financial landscape as well, we can expect the popularity to continue its upward trend. Apart from the price increase, this trend is also likely to fuel the launch of many unique platforms revolving around cryptocurrencies, thus expanding the ecosystem.
As mentioned by NASDAQ, 2021 could be pivotal and quite progressive for the development and adoption of cryptocurrencies, thus allowing the investors to enjoy more financial gains as well.
Note: Previously, many governments did not regard cryptocurrencies as a legal commodity, and hence, it was quite difficult to file taxes for the earnings made with crypto. However, there are several governments now that have explicit guidance for filing crypto taxes.
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