Five things to know about institutional investors (smart money) and cryptocurrencies
Institutional investors and cryptocurrencies a short time ago were the opposite sides.
As most investment institutions, especially traditional ones, rely on banking institutions, the latter of which was Bitcoin a threat.
But the story changed, and institutional investors became more adapted to cryptocurrencies.
Almost every week there is a story about a well-known institution adopting cryptocurrencies, or an announcement by a major company that it will accept Bitcoin or other alternatives.
With the recent news about the bitcoin price hike, MasterCard embracing digital assets in its network, and Tesla's purchase of $ 1.5 billion worth of Bitcoin, it seems that there is energy and excitement about the cryptocurrency industry today that we haven't seen before.
A few years ago, people didn't know anything about crypto.
And if they do, it could be related to a technology or a dark web crime.
Today's data has changed, and Bitcoin is not only a popular alternative to fiat currency, but it has also become an attractive investment opportunity.
Many people can see that cryptocurrencies began a long time ago on the path towards becoming an institutional asset, but how do institutional investors view cryptocurrencies.
Are they excited about the opportunities offered by cryptocurrencies? Or are they skeptical about her future?
Five things to know about institutional investors (smart money) and cryptocurrencies:
1. Institutional investors have already invested in Bitcoin:
Investing in cryptocurrencies is not unprecedented for institutional investors, or a new fashion is on the horizon.
Many organizations have already jumped onto the cryptocurrency bandwagon.
According to the source, 87% of institutional investors surveyed have heard of Bitcoin, and 70% of them have actually invested in Bitcoin at some point in the past.
Some investors from the aforementioned source indicated that they were hesitant to invest in Bitcoin due to the high volatility.
This could happen and the volatility in the crypto market will decrease, with the increase in the institutionalization of cryptocurrency assets in addition to the entry of more investors and the increase in trading volume, more transparency in crypto projects, and more widespread use and awareness.
The fact that accredited investors are already aware of investing in Bitcoin means that the industry will get there faster.
2. Institutional investors want to invest more in Bitcoin:
While 70% have already invested in Bitcoin, 74% believe that they will likely invest in Bitcoin in the next year.
There are a number of reasons why they want to invest in cryptocurrencies, which can be driven by simple reasons like fear of losing what they see as the next big thing, or as a result of a deep market analysis.
It appears that the majority of investors are buying and holding Bitcoin for future returns.
This bullish trend reflects the positive sentiment about cryptocurrencies and confidence that they will continue to rise.
This long-term strategy may be partly due to investors seeing cryptocurrencies as a good store of value, such as gold, which can hedge against fiat currency fluctuations, especially in light of the current unstable conditions due to the Coronavirus.
Investors are buying cryptocurrencies for short-term investments as well, viewing sudden jumps in prices as an opportunity for a quick return.
Few other institutional investors invest in cryptocurrencies for the reasons they were originally created as the basis for Bitcoin, as they do not want to be subject to government regulations and see the decentralized currency more in line with their beliefs about privacy and decentralization.
3. Attention to DeFi Financing and Decentralized Applications:
In addition to investing in Bitcoin, these institutional investors are interested in decentralized financing, DeFi, and 90% of them want to invest in decentralized financing products DeFi in the future, according to the results of the survey conducted by the aforementioned source.
These institutional investors demonstrate knowledge of what is happening in the crypto market and the decentralized financing space.
They know about smart contracts, decentralized trading platforms, stablecoins, and other cryptocurrency applications.
This shows that institutional investors are not just one trend when it comes to where to direct their money, but rather spread their investments around the entire cryptocurrency system.
4. Diversity and Bitcoin Selection:
According to the same source, institutional investors diversify their portfolios, and incorporate cryptocurrencies within them.
Although cryptocurrencies have not taken the largest percentage, they are present.
When asked about the best investment for four years in the future, many respondents representing institutional investors answered that they would invest in bitcoin instead of blue chip stocks such as "Apple" or "IBM".
Bearing in mind that accredited investors tend to be more risk tolerant, this indicates one thing that smart investors see in Bitcoin as an opportunity to provide a better return on investment than any other stock.
5. Investment institutions believe that changing some things in the crypto market will attract more other investors:
Increasing investments in cryptocurrencies will be critical in gaining institutional asset status.
Institutional investors have the most knowledge about what needs to be fixed in order to invite more investors into the crypto arena.
The biggest obstacle to expanding the investor group into the cryptocurrency market is the abundance of cryptocurrency scams, which have caused investors' money to be stolen worth more than $ 16 billion since 2012.
In addition to the scams, the lack of transparency around cryptocurrency projects and systems alienates investors, as well as a lack of education and awareness of the entire industry.
In other words, better ways must be discovered to protect investors, give them the tools they need to do due diligence and evaluate their investments, and educate them more about cryptocurrencies.
in conclusion:
The crypto market is rapidly moving into the future, and new investors will be the ones pushing it to grow and expand further.
While many are excited and excited about the future of the cryptocurrency market, there is still work to be done to make investing in digital currencies available and safe for institutional investors.