When the first digital coin – Bitcoin – emerged in 2009, nobody dared to suppose that ten years later it would become the most desired investment asset not only among retail investors but also institutions. Having demonstrated a couple of price soars first in 2017 and then in 2021, Bitcoin won the hearts of traditional financial companies once and forever.
How do investors use Bitcoin? There are many options, from working on a market-maker crypto exchange to participating in startups and launching own tokens.
Crypto Institutional Investors: How Everything Started
We have divided the stages of institutional adoption:
- Institutional crypto investments started after the first Bitocin’s surge in price in 2017 ($19,118). In 2018 the price slightly dropped, which discouraged many individual investors. At the same time, many financial companies realized the opportunities of digital assets and tapped into this market.
- In 2020, during the coronavirus pandemic, BTC and other leading cryptos have become a kind of “safe haven” for investors, where they put their funds to protect against inflation. By mid-2020, the Fidelity Digital Assets report showed that 36% of institutions in the USA held crypto, while 60% considered it as a potential asset class to be added to their investment portfolios.
- 2021 was the year of growing institutional crypto trading – its volume on the Coinbase institutional cryptocurrency platform reached $1.14 trillion (one year earlier, it was 10 times less). In the same year, retail trading volume reached only $535 billion. Important to note that in 2021, those institutions who have already invested in crypto, increased their share to 52%.
Institutional Cryptocurrency Trading in 2022
Despite Bitcoin maximalists’ forecasts of crypto replacing traditional finances, it did not happen. Instead, the market underwent a huge drop in 2022 – Terra collapse and FTX bankruptcy – causing mass disappointment among retailers and institutions. However, it did not stop many companies from investing – on the contrary, now they realize all the risks and act accordingly. These are not empty words – Fidelity’s study in 2022 shows that the number of institutions in crypto grew to 58%.
Despite the collapse in 2022, large institutional players still hold Bitcoin (MicroStrategy, Tesla, Galaxy Digital Holdings) in 2023. In addition, a range of banks continue to cooperate with crypto and blockchain startups (Revolut, JPMorgan Chase, Juno). What keeps other institutions aside is the lack of regulation, high volatility, and possible destabilization in the economy. With the development of institutional services and clear regulation frameworks for crypto investments, institutional interest in crypto is going to grow in the next few years.