Institutional investors have played a key role in the global adoption of crypto, pushing digital assets into the mainstream.
About 7.5% of the world’s population used digital assets, that number is expected to reach 8% by next year, according to a report from MatrixPort. The launch of Bitcoin and Ether ETFs earlier this year attracted billions in investments from major financial institutions like BlackRock, Fidelity and Franklin Templeton.
Bitcoin has maintained its position as the flagship cryptocurrency, reaching an all-time high earlier this year. Besides institutional investment, another factor driving its rise is its value as a hedge against the stock market during times of economic uncertainty.
“According to BlackRock research, Bitcoin has a low long-term correlation with stocks and bonds, with periods of dislocation, and therefore can serve as an excellent portfolio balancer,” said Joel Hugentoblercryptocurrency analyst at Javelin Strategy & Research. “Bitcoin also acts as a hedge against fiscal, monetary and geopolitical risks.”
“During the US-Iran escalation a few years ago, COVID-19, the previous US election cycle, Russia’s invasion of Ukraine, and the regional banking crisis In the US last year, bitcoin returned an average of almost 44% on a 60-day return basis. “, he said.
Here to stay
Although cryptocurrencies are increasingly seen as a hedge against market volatility, digital assets face their share of uncertainty, particularly in the United States. As digital assets are traded on decentralized exchanges, criminals have used crypto platforms for fraud and other illegal activities.
The potential for criminal activity has led many US regulators to crack down on crypto and require digital asset companies to answer to the same laws as brokerage firms. Instead of taking action against crypto companies, the UK and EU have instead worked to create a better regulatory framework to guide investors and the crypto industry.
Support from investors, governments, and the growing crypto community means digital assets are here to stay.
“The price of Bitcoin has a strong correlation with the global money supply, and some consider Bitcoin to be the global liquidity index,” Hugentobler said. “Bitcoin therefore provides a strong hedge against the depreciation of fiat currency, also known as inflation.”
