Balancing Risk and Opportunity: How Long Can Institutions Ignore Crypto
It’s good to think about when institutions larger than the crypto ecosystem start to realize the potential of cryptocurrency. Can the ever-evolving world of crypto be kept out of mainstream adoption any longer?
Larry Fink is the CEO of BlackRock. As the largest asset management firm in the world with $9.4 trillion in assets under management, Fink doesn’t seem to hold back when it comes to voicing his opinion. Fink dismissed cryptocurrencies as an “index for money laundering” in 2017. But three years later, BlackRock’s CEO admitted that Bitcoin and other assets had caught his attention.
Fink stated in a recent article: “I believe that the role of cryptocurrency is to digitize gold in many different ways.” Fox Business BlackRock, which is waiting for the SEC’s approval for the Launching the first Bitcoin ETF, it aims to make history in the world of cryptocurrencies.
It is a unique form of institutional advocacy. The launch of a crypto exchange-traded fund by the world’s largest asset management firm is more than just a way to increase exposure to Wall Street.
Data shows that institutions have already taken notice of the latest surge in crypto adoption. According to a PwC report titled “Rebuilding Trust in Cryptocurrencies,” 46% of hedge funds surveyed confirmed that they intend to invest more capital in this asset class before the end of 2023. 37% said they are waiting for the market to mature before investing.
Maintaining an institutional-focused ecosystem
The biggest risk for institutions looking to adopt crypto is entering a world where many participants promote decentralization and reject traditional financial services.
Decentralization can make it difficult for centralized organizations to regulate an industry. This could cause some institutional investors to be concerned about a perceived lack of security. However, some market commentators believe that the introduction of institutions will create an ecosystem that is adaptable and can accommodate all players.
Clara Medalie explains: “I think we will see two versions,” explains Clara Medalie. Research Director of Crypto Market Analyst Kaiko. “I believe we will still see the continuation of more decentralized finance that is completely trustless. We will also see a permissioned decentralized version integrated by these more institutional players, and this is all about tokenization.”
”When it comes to traditional finance, you can’t have a fully automated DeFi because there are risk components, Compliance and regulation exist.” I believe it will be a mix of both depending on the actual use case.”
The introduction of Bitcoin ETFs will accelerate institutional access to these new hybrid crypto markets. This will give institutional investors and traders the opportunity to utilize a familiar and regulated investment vehicle that institutions can access through more traditional brokerage accounts.
It would save institutions the hassle of having to invest directly in decentralized exchanges to store and purchase their assets. We will see more institutional investors enter the crypto market by allowing them to access it through ETFs. They would not have done this if they were hesitant or worried about the existing infrastructure.
Bitcoin’s Halving and the Next Bull Run
Since its inception, Bitcoin’s pre-programmed halving has been a catalyst for the bull market to run.
The “Halving” event is a four-year cycle in which Bitcoin mining rewards are distributed to miners and then halved. This automatically increases the scarcity of the asset.
Bitcoin’s halving in 2016 and doubling in 2020 each culminated in a new high for the asset the following year. Much has been said about the possible resumption in 2024.
Standard Chartered’s prediction that Bitcoin’s value will reach $120,000 by the end of 2024 is largely due to the BTC halving cycle.
Standard Chartered’s prediction is supported by a loose correlation seen on the Bitcoin stock-to-order chart. This trend could be profitable for both institutional players and the cryptocurrency market.
The key to their future lies in the institutions themselves
The current cycle of institutional takeover is that the pioneers in the industry are the ones who can have a significant impact on the industry.
“Are we ready for institutions?” “Looking at everything that has happened, the answer is probably no,” said Chen Arad. Chen Arad is co-founder and chief experience officer at Solidus Labs, a crypto risk monitoring company. “But the map is part of the territory.”
Only through institutional adoption will the crypto space become a productive space for more institutions.
We are observing that the crypto ecosystem is becoming more stable and sustainable for all participants, despite the fact that there are still risks in the industry.
There may be a surge in advocacy as Bitcoin ETFs launch, offering institutions unprecedented access to crypto markets in a regulated environment. This could translate institutional interest into action. (*)
