2021 is likely the year that institutional investors actually embraced Bitcoin. According to The Block Research, venture capitalist funding for crypto asset firms increased 720% year-on-year to $ 25.1 billion.
Throughout the year, several institutional investors and companies have invested in Bitcoin, most notably Jack Dorsey’s Square firm, which has allocated nearly 5% of its assets to Bitcoin. The idea is that as a store of value, BTC is a strong hedge against inflation.
It was Marathon Digital Holdings that sparked this wave of investment with a $ 150M purchase of BTC in January. That said, it was Michael Saylor’s MicroStrategy Inc. that really drove the adoption of crypto by institutional investors.
The American company specializing in technology, has staked everything on Bitcoin. To date, it has invested a total of $ 3.66 billion in digital assets. MicroStrategy now holds 122,477 BTC, the largest amount of bitcoin owned by any publicly traded company. At the current price, that equates to $ 5.91 billion, according to Bitcoin Treasuries.
MicroStrategy’s decision to buy BTC as a strategic reserve asset was the subject of controversy at first. However, it has done a lot to bolster Bitcoin’s image as a store of value.
Shortly after adding the hashtag #bitcoin to his Twitter profile, Elon Musk purchased $ 1.5 billion worth of BTC on behalf of his company Tesla. In March, Tesla started accepting Bitcoin as a payment method. However, she reversed her decision a few weeks later due to environmental concerns related to Bitcoin mining.
Today, Tesla holds a total of 43,200 BTC, or $ 2.1 billion at the current price. Indeed, several companies listed on the stock exchange, and even some governments, now hold bitcoins in their reserves. These companies bought the bulk of their BTC holdings in the first half of 2021.
Big Financial Institutions Find Their Way In Crypto
Larry Cermak, Vice President of Research at The Block, said that while adoption by institutional investors remains “extremely speculative”, the [crypto] is now more mature than ever. Unlike 2017, when things were still unclear, it is now clear that crypto is not going to go away.
Many entities started accepting crypto payments even before 2021. But this year the list has grown significantly. Especially when some of the big caliber groups like WeWork, Substack, and insurance giant AXA started accepting Bitcoin payments.
In a 150-page report titled “Digital Asset Outlook,” The Block Research reported that banks and other traditional institutional investors began to interact directly with the cryptocurrency market in 2021.
Companies like PayPal and BNY Mellon, which has $ 25 trillion in assets under management, have also ventured into crypto, with strategic acquisitions of entities sharing their vision. Giants such as State Street and Finserv have also entered the industry.
In March, well-known US investment bank Goldman Sachs relaunched a crypto trading desk it had closed shortly after opening during the 2018 bull cycle. In May, the company executed its first trades on Bitcoin derivatives.
During the same period, another US banking group, Morgan Stanley, announced the opening of access to three funds offering exposure to Bitcoin for high net worth clients. In June, Spanish bank BBVA launched a crypto trading service for private clients in Switzerland.
SEC approval of a Bitcoin ETF was long overdue
To top it off, the US Securities and Exchange Commission (SEC) has approved three Bitcoin Futures Exchange Traded Funds (ETFs). Applications from Proshares, Valkyrie and VanEck were given the green light between October and November.
In March, the Canadian securities regulator approved Purpose Investments’ Bitcoin ETF, the world’s first such fund. However, the crypto community has been eagerly awaiting the approval of these ETFs in the United States. As a reminder, it was the Winklevoss twins who submitted the first ETF application eight years ago.
Moreover, the all-time high of $ 69,000 reached on November 10 by Bitcoin, a few weeks after the approval of the first Bitcoin ETF by the SEC, was not at all surprising.
To date, the volume of Bitcoin futures on the Chicago Mercantile Exchange (CME), now used for Bitcoin ETFs, has reached $ 700 billion this year. Last year that figure was $ 130 billion, the report says.
“It has been a historic year for cryptocurrency and blockchain technology. And it’s not just because of the rise in the price of Bitcoin, ”Emil Angervall, co-founder of Corite, a blockchain-based digital music company, told BeInCrypto.
“While the N ° 1 cryptocurrency in the market was honored in the first quarter of the year, in particular thanks to the growing interest of companies and institutional investors … the biggest trend of the year in the field of crypto has been the surprise emergence of a lesser-known technology: non-fungible tokens (NFTs), ”he added.
Crypto investments by venture capitalists are increasing
In 2021, private investments allocated to crypto companies exceeded those of the previous six years combined [totalisant 14,4 milliards de dollars], said Larry Cermak, vice president of research at The Block.
Since the start of the year, venture capitalists’ investments in crypto have reached $ 25.1 billion. This is therefore an increase of 719% compared to 2020. In total, venture capitalists have invested their funds in 1,703 crypto or blockchain projects this year.
Funding ranges from a few million to hundreds of millions of dollars. Firms focused on NFTs or gaming, trading or brokerage, and crypto-finance have attracted the largest funding.
“2021 has been a defining year for the blockchain and cryptocurrency industries. They have gone from the status of infant industries to that of industries that host a diverse set of businesses of all levels and generate income, ”he said.
“Unlike in previous years, these sectors are now prepared and have the necessary infrastructure to meet the demand of institutions, traditional investment funds, asset managers, wealth management offices and high net worth individuals” .
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