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Rising Institutional Demand for Cryptocurrency Sets the Pace for Future Growth

Aug 10, 2019
byOmar Abbas

Financial institutions are rushing to enter the crypto market in 2019, setting high expectations for the remainder of the year and 2020.

According to a Coindesk interview with Oliver von Landsberg-Sadie, CEO of financial services group BCB, the various bull runs over Bitcoin’s lifecycle were based on different types of increased demand. “The 2013 bubble was driven technocrats and dark web trawlers and the 2017 rally was led by the whims of speculative retail traders, 2019’s growth belongs to financial institutions who are diversifying stale portfolios and finally have the professional machinery to do so,” said Landsberg-Sadi.

Grayscale Bitcoin Trust, an investment fund that invests exclusively in Bitcoin, serves as a strong indicator of institutional demand in the cryptocurrency. According to Grayscale’s Digital Asset Investment Report, approximately 80% of investment in 2018 came from institutional investors and the remaining coming from accredited/individual high-net-worth investors. By the end of April 2019, Grayscale owned 225,638 Bitcoins, which is close to 1.3% of the current circulating supply – reaching an all-time high of Bitcoin held by the trust. Grayscale purchased an additional 11,236 Bitcoins in April alone, which is more than the previous four months combined, signalling a recent surge in institutional demand.

Cryptocurrency has been argued to be a real threat to traditional finance, particularly with Facebook’s advantage of exposing billions of people around the world to the digital assets space via its Libra/BTC pairing. Progress also continues on the institutional side as ErisX, a settlement and delivery clearinghouse for crypto assets, was granted a derivative clearing organization (DCO) license by the United States’ Commodity Futures Trading Commission (CFTC).

With Bitcoin’s market cap now over US$200 billion and its 2019 bullish fundamentals, continued growth in this space seems inevitable. The timing, however, could be largely due to how the industry navigates upcoming regulatory frameworks.