As a result of the ongoing upward trend, many prominent institutions from the traditional financial world have tried to join the crypto bandwagon in order not to miss the ongoing action. For starters, a jump in open interest and trading volume for Bitcoin futures has been observed across the board in recent months. While that may have been expected, it may come as a surprise that the Chicago Mercantile Exchange, a global derivatives exchange, recently the world’s largest Bitcoin futures trading platform.
In this regard data released by crypto analysis platform Bybt indicates that CME accounts for $ 2.4 billion of the $ 13 billion total open interest in Bitcoin futures, followed closely by the $ 2.17 billion total of crypto exchange OKEx and for on other prominent players such as Binance, Huobi and Bybit.
It should be no secret that Bitcoin’s (BTC) rapid rise since December 2020 is increasingly attracting the attention of investors around the world. To put things in perspective, despite BTC’s recent dip that saw it drop to just below $ 32,000, the currency is again is trading well above the $ 38,000 threshold – and thus a net 30-day profit of about 95%.
Is institutional interest increasing or is stagnation occurring?
The recent volatility has raised concerns about the sustainability of the current bull season and has raised questions about whether institutional interest in Bitcoin is starting to plateau. Konstantin Anissimov, executive director of the UK-based cryptocurrency exchange CEX.IO, told Cointelegraph that it’s important for newbies to realize that the game isn’t just about institutions making their way into the market, but rather that they see a decline in the market. risks:
“Unless something really drastic happens that could turn this entire market upside down – and I can hardly imagine anything so bad – I think more large companies will continue to invest in Bitcoin and other cryptocurrencies in the future.”
Quinten Francois, host of the YouTube channel Young and investing, believes that most of the institutions that wanted some of the action have probably already made their way in, adding that during parabolic stages like this it is hard to imagine more big players with money entering this space, in at least until the end of the year when things become more stable.
That said, he added that most of the institutions that have boarded the crypto gravy train are now likely to accumulate during dips, and when they stop, retail money will slowly flow back into the market, reducing the value of BTC is being pumped even further: “They are smart money and know what they are doing, they are not going to buy parabolic moves.”
Jonathan Leong, CEO of cryptocurrency exchange BTSE, told Cointelegraph that “Institutional cryptocurrency inflows have just begun.” He added, “The rapid rise in the price of Bitcoin and other cryptocurrencies during Q4 has a direct correlation with these institutional inflows or the expectation of such inflows.”
Will institutions reduce market volatility?
It’s undeniable that Bitcoin is a much more mature asset than it was during the bearish phase of 2018, especially as regulations in certain jurisdictions have improved significantly. Furthermore, the crypto market now has a large number professional trading houses and non-crypto companies participate in it.
These factors can greatly help dampen Bitcoin’s volatility and increase liquidity as an investment asset, Anissimov said: “Institutional investors are not so much the key to boosting Bitcoin’s bull run, they are a path along which this market as a whole can be tempered, more stable and more efficient. “
That said, as established institutions get into the crypto industry, they will have an effect on the price movement of most cryptocurrencies. Ultimately, this can help the industry as a whole, especially when you consider that most traditional financial players will strive for long-term deals that could potentially help protect Bitcoin from crashing in a way similar to what was seen in 2018.
The recent moves are worth noting
Earlier this month, CoinShares, a European company engaged in crypto finance and exchange-traded products, announced that it had successfully facilitated the trade of more than $ 202 million in XBT (Bitcoin) certificates on the first day of 2021 on the market. It is worth noting that the Bitcoin exchange-traded-notes provider has been approved by the Swedish Financial Supervisory Authority, and the company’s aforementioned offers are currently available for purchase through Nasdaq.
According to CoinShares’ “Digital Asset Fund Flows Weekly” report on January 11, it is $ 34.5 billion in capital detained in crypto investment products from January 8. Of this total, $ 27.5 billion, or 80%, is in Bitcoin funds, while $ 4.7 billion, or about 13%, is invested in Ether (ETH) Products.
Comparing the performance of Bitcoin funds during this ongoing bull run to that of 2017, the report states: “ We have seen much greater investor participation this time with net new assets of US $ 8.2 billion compared to just US $ 534 million in December 2017. “
Last year, the United States Office of the Comptroller of the Currency also said in a groundbreaking decision that national banks can hold crypto assets. This announcement was followed by another important development in which the OCC also stated that US banks can even provide services to stablecoin issuers, such as holding reserves.
Although some traditional institutions already embraced this practice prior to the above decision, there was an atmosphere of uncertainty around this space due to a lack of legal clarity. Now that official clarification has been given, stablecoins backed one-for-one by fiat currencies held in a bank’s reserves are not considered a risk in the United States.