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Bitcoin: How Institutions Unleash the Bitcoin Price Funnel (2022 Outlook)


Relevance up to 11:00 2022-01-08 UTC+00

Institutional money entered the cryptocurrency market in 2021. And although Elon Musk, Microstrategy and Jack Dorsey are mainly in the headlines on the wave of hype, there are many more large companies that consider Bitcoin as an alternative asset.

Institutional Implementation Perspective in 2022

A recent survey from Deloitte showed that 76% of financial leaders believe digital assets will replace fiat money in the next 5-10 years.

Big players are buying more now than ever before. Many large companies and even some governments are currently using cryptocurrencies, and the number of such investors is expected to grow. Nickel Digital Asset Manager found that 62% of firms plan to buy bitcoin within the next year.

These decisions are also not accidental and are not made spontaneously. Every purchase is preceded by lengthy board meetings and risk assessments.

By buying and selling over the long term, they help create more scarcity and therefore more demand. This catalyzes a positive cycle that will see the value of Bitcoin continue on a healthy growth trajectory. This institutional era marks a more mature period for Bitcoin.

What attracts institutional investors to cryptocurrency?

Anton Chashchin, Managing Partner at Bitfrost, notes that there are three main reasons institutional investors enter the cryptocurrency market.

1. Converting portfolio share to cryptocurrency

If this is the task, the price does not matter. From startups to billions of dollars in funds, if the goal of an institution is to convert 1%, 10%, 20%, or even 50% of their portfolio into cryptocurrency, they can do it no matter how much it currently costs.

Bitcoin is becoming an increasingly popular portfolio component. By safely allocating only 1% to it, the company can safely expect a return of 1-5% without any significant losses. By comparison, an asset holding up to 30% of its portfolio can only provide an equivalent level of return in everyday life.

2. Cryptocurrency is attractive from a long-term strategic point of view

Institutional investors who are inclined towards long-term investments have noticed the potential of cryptocurrency. Many institutions have lockdown policies, corporate institutional money, or use Bitcoin as a hedge against long-term inflation trends. Thus, we are now seeing a simultaneous increase in institutional investment, which creates even more interest from buyers in the future.

3. Institutional trading creates large trading volumes, and large volumes attract new institutional players

And since bitcoin is quietly surpassing bar after bar in its growth, we may well see a growing interest in it from traditionally conservative organizations.

Market matures thanks to institutional investors

Industry experts point out that institutional adoption is creating a positive cycle for cryptocurrency. Its widespread implementation has generated complex regulatory initiatives and frameworks. And this, in turn, speaks of a stable and developing market.

Thus, more institutional investment means more stability. And the greater stability of the crypto market will attract more institutional investment. Aside from the hype around Bitcoin, this is an ongoing cycle that could actually lead to the rise of the main cryptocurrency.

Meanwhile, nothing has changed locally on the BTCUSD chart since the beginning of the year, despite the high open interest. The BTCUSD price is near the sideways support of 45,733.38-52,216.77, maintaining the technical potential of recovery to its resistance.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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